Customer Segmentation for Ecommerce: 5 Ways to Segment Customers
Do you want to make more money from your ecommerce website? Then you need a robust idea of who you’re selling to. Who is your primary audience and which group of customers brings the most revenue? Does your website tap into their motivations, desires and pain points? Do they see themselves reflected in your website copy and marketing campaigns?
In our experience of analysing ecommerce websites, many businesses make the mistake of using a one-size-fits-all approach. This simply doesn’t work. In order to increase your online revenue, you need to understand your users inside out, find out how they’re responding to your website and divide them into appropriate segments.
Why are segments important?
You know the old fable: please all and you’ll please none. This saying is especially true if you run an ecommerce business. If you try to cater to the masses in a generalised way, your message won’t resonate with your customers.
Dividing customers into logical groups based on characteristics they have in common allows you to provide a tailored experience. By focusing on these groups in isolation, you can gain a deeper understanding of their behaviours and desires, find opportunities to improve their experience and keep them coming back to you for more.
Segmentation enables you to pinpoint the groups that will be most profitable and it makes your efforts more measurable, so you can demonstrate ROI for each segment. Ultimately, taking the time to research and understand your customers’ specific needs and making sure your website meets these needs will help you improve your conversion rate.
How can you start dividing your customers into smaller groups? Here are 5 ways to segment your customers more effectively.
Demographic segmentation is perhaps the most common method of splitting customers into manageable groups. This includes:
- Marital status
- Occupation and income
- Children (number and age)
- Education level
Having this information at your disposal can reveal a lot about your current and potential customers and help develop strategies to make them buy from you. For example, if you sell clothing, segmenting by gender can uncover distinct interests, needs and behaviours that differ between the two groups, enabling you to target them more precisely. This could be anything from tailored recommended products to pop-ups.
For example, Nike is a brand that’s well known for segmenting by gender. Not only do they have distinct sections for men and women on their website, they have separate marketing campaigns to target these demographics.
Even the most successful ecommerce websites face the issue of basket abandonment. This happens for a number of reasons, from users becoming distracted to people finding a cheaper alternative elsewhere. A study by the Baymard Institute found that the main reason for cart abandonment is customers thinking shipping prices are too high.
It’s frustrating, hurts your bottom line and worst of all, it’s somewhat unavoidable. Creating a segment of people who abandon their basket at the checkout stage may unearth usability issues with your website. You can also use the data to reengage these customers, and they’re worth leveraging because they’re further down the buying funnel, so are clearly interested in what you have to offer.
Although you can’t completely eliminate this problem, there are ways to improve your website that will encourage users to purchase. Analyse where these users experience friction on your website using tools like Hotjar and User Testing. You’ll find that there are many solutions to their problems, whether it’s improving the credibility of your website, minimising distractions or providing stronger calls to action. The good news is that you can get people through the checkout process without having to offer free shipping.
If one group of customers accounts for a sizeable chunk of your revenue, it makes sense to leverage that, right? Segmenting by spending behaviour can be an effective way to make more money from your existing website traffic.
Use Google Analytics to see often these people buy, how much they usually spend and when they buy. You may notice patterns and trends that you can use to your advantage. However, bear in mind that Google Analytics data can’t always be trusted and your account must be configured correctly to give reliable data.
Creating this segment and improving how these users experience your site is vital for long-term retention. Offer them special discounts, rewards and priority access to new products. You can even up-sell relevant products and services to encourage them to spend more. Analysing behaviour like basket value can also help gather insights that may lead you to testing different delivery thresholds.
Knowing who your customers are is one thing, but understanding how they’re getting to your site is another. You may have your fingers in many marketing pies, experimenting with PPC, email and social media advertising. But which traffic sources are bringing relevant, converting traffic and actually demonstrate a decent ROI?
Segmenting by traffic source in Google Analytics allows you to monitor the performance of each source and compare them to each other. When you create data segments in Google Analytics, you can gain useful insights and spot patterns by focusing on your users in such a granular way. As a result, you’ll be able to allocate an appropriate budget to each channel and acquire traffic that’s more likely to convert.
Personalisation is so much more than using customers’ names in your brand communications. It means changing your website and content to suit specific segments of your audience. Companies like Amazon use personalisation tactics to create familiarity and offer recommendations based on users’ behaviours and interests.
Using personalisation on your website shows customers that you understand and value them, and it highlights that your website is relevant to their needs. There are plenty of personalisation tools available, such as Evergage and Optimizely.
There are varying levels of personalisation, from basic segmentation to AI-driven options. For basic segmentation, you’ll choose a segment from default options (e.g. country, location, weather), or from your CMS if you have the data available. You can then tailor the user’s journey based on their segment. So if someone in Europe visits the site, you can display the currency in Euros and show them European delivery pricing by default.
AI personalisation can be much more advanced and uses machine learning to automatically build patterns, which can then display relevant content to users, such as custom product recommendations. Personalisation offers various options for your customers and is well worth investing in.
The more data you gather about your customers, the more accurate your segments can be. It doesn’t end with just setting up your segments: they need to be continually monitored and analysed so you can adjust your efforts accordingly.