6 Types of Customer Segmentation for Better E-commerce Personalization

Types of Customer Segmentation For E-commerce

We know you’ve been thinking of ways to maximize the ROI on your marketing spend. If you haven’t found anything that could add value to your current e-commerce campaigns yet, we have good news for you! Customer segmentation or marketing segmentation is what you are essentially looking for. For beginners, consumer segmentation can yield much better returns for email marketing campaigns, get more subscriber sign-ups, enhance customer retention, and push more sales. 

Dividing your target audience on the basis of shared attributes and behavior can be a powerful strategy. Any e-commerce brand looking to offer hyper-contextual & personalized communication can leverage customer segmentation. 

Wait…but what is customer segmentation and why is everyone talking about it?

Customer segmentation is simply grouping your target audience into different clusters – each on the basis of shared qualities, preferences, or behavior. The attributes used to cluster these groups determine the type of market segmentation being employed. 

E-commerce brands utilize the following 6 types of segmentation 

  • Demographic segmentation – Demographic segmentation is based on the audience’s gender, age, marital status, and other attributes that could define a population. E.g. segmentations include – promoting a specific product to those with a certain annual income threshold, promoting discount offers to new mothers, and so on. 
  • Geographic segmentation – As the term suggests, customer segmentations built on the basis of the target audience’s location. This can cover regional, domestic, and international boundaries.
  • RFM or Recency, Frequency & Monetary – This market cluster is created on the basis of the most recent purchase (Recency), the number of purchases made (Frequency), and the total amount spent by the customer (Monetary). This segmentation sets and exploits different brand loyalty benchmarks. 
  • High-value customers – E-commerce brands can make a list of their top-paying customers i.e. The most profitable customers over an average customer lifecycle duration. Understanding the attributes of the most profitable customers can help retailers identify other clusters similar to them, and expand their market footprint.  
  • Behavioral segmentation – Online data pertaining to customer behavior, past actions, likes, and dislikes can indicate their possible future actions. While behavioral analytics is a separate domain in itself, the segmentation based on it can yield more sales and conversions. For instance, behavioral cues like product browsing, adding products to the cart, abandoning the cart, searching for discount coupons, etc. indicate specific behaviors. If the customer is nudged with a relevant message owing to his/her online behavior, they are likely to convert. 
  • Customer status – E-commerce brands can create custom segments based on customer status i.e. inactive, cold, new, and repeat to send them personalized communication. 
  • Psychographic segmentation – Psychographic customer segmentation became popular with the advent of Facebook advertising. It is about dividing your audience as per their culture, attitude, beliefs, and other ‘soft’ attributes of personality. Psychographic segmentation examples include targeting a sports drink to a group of ‘fitness enthusiasts,’ or promoting bio-degradable utensils to people who are interested in an eco-friendly lifestyle. 

The reason customer segmentation is the talk of the e-commerce town is because of its huge upsides and simplicity of implementation. 

Customer Segmentation Benefits

Customer segmentation yields the following benefits to digital retail brands without making massive marketing changes.

Providing More Personalized Customer Experience

Personalization is at the heart of growing e-commerce companies. Considering 79% of the consumers are readily influenced for purchase with a personalized offer, effective customer segmentation can help brands tailor offers suited to their taste. 

Optimizing Returns on Marketing Budget

Unlike generic broadcasts, marketing messages that reach their intended audience segment obviously yield better conversion rates. If you are using consumer segmentation, you can quickly optimize the returns on any campaign. 

Implementing a Lean & Effective Marketing Strategy

Think of practicing audience segmentation as an exercise to understand your customers better. Customer segmentation helps brands evolve their overall marketing strategy and messaging. As you learn the attributes of your best customers, their likes, problems, and what is important to them, you can use that information in messaging, creative development, and crafting the offer.

Tapping New Products & Markets

Think of every customer cluster as a lens that reveals unique insights into product development, or a whole new untapped market. For instance, a customer segmentation based on ‘regular high-value purchases’ might become a potential seed market for ‘collectors’ who see your product (like action figures, history-themed apparel, etc.) in that light. 

Funneling your customers into different ‘buckets’ as per their likes and preferences can certainly help your online brand establish a stronghold in the given niche. 

Wondering how to make the best of customer segmentation for your business? 

Putting customer segmentation into action is really not that difficult. In fact, with a marketing automation tool like Wigzo, your business can practically implement it and launch segment-driven campaigns within minutes!

Though, the right segmentation strategy is formed over time as the crunchable data grows in size. 

Nevertheless, the following are a few tested strategies to put consumer segmentation to work for you!

Customer Segmentation Strategies

Segmenting by Customer Type

Depending upon the customer type – new or returning, you can show different offers to acquire and retain them. For example, you can run a welcome discount for first-time customers, and a discount deal for returning customers. 

On the Basis of Site Engagement

Depending upon how long a customer engaged with your site content can reveal insights into their wants. For instance, you can send discount deals via email to customers who have spent at least 50 seconds on a product page.

Landing Page Segmentation

This is another type of specific segmentation strategy whereby a customer is targeted on the basis of the landing page they initially landed on. This is based on the rationale of the ‘initial intent’ of the customer. For instance, if a customer landed on a page for jackets but is now browsing shoes can still be persuaded with personalized offers related to jackets. 

Platform and Device Targeting

This is a rudimentary segmentation strategy, yet immensely powerful. Knowing the devices and platforms your customers use, you can create effective segmentation to push more sales. For example, owners of a particular device can be categorized into a certain income group. This cluster can then be targeted with offers and products most suited to their lifestyle and purchase power. 

Average Order Value

How much a customer has already spent on your products is a direct indication of how much they will likely spend on your products in the future. Segmenting your customers as per the average order value opens up the opportunities to upsell and cross-sell to them.

Cart Profiling

Cart profiling allows for endless permutations and combinations for consumer segmentation. Within this strategy, you can target customers vis-a-via similar products added to the cart. Or, you can promote products with the same profile attributes to the customer – say color, size, product variation, etc. 

Ending Note

Effective customer segmentation can be one of the best (and effortless) investments for your e-commerce brand if deployed at scale. From boosting overall ROI for your campaigns to unraveling invaluable customer insights, it can uplift your sales bottom line. 

If you wish to leverage customer segmentation for your business, you can check out the FREE demo for Wigzo.

Stay tuned with us for more blogs on e-commerce marketing success. 

Happy selling!

wigzo cta

Winay Bari

Winay Bari

Winay Bari is a passionate Digital Marketing Enthusiast with over 8+ years of experience in B2C, B2B SaaS Marketing. Currently working as Sr. Marketing Manager for Wigzo Technologies, Winay is an avid Chai Lover, Dreamer & Hustler!

Related Blogs