How Proper Customer Segmentation Can Lead to More Sales

April 13, 2021 - 12 minutes read

A guide on how to segment your customers and boost your revenue.

In a time where more businesses than ever are migrating online, standing out in your niche is vital as a retail or eCommerce business owner.

To thrive in today’s fast-paced digital landscape, you need to cut through the noise while giving your customers exactly what they want.

While putting out a generic sales message and sharing a deal or two was once an effective sales tactic, today’s shoppers demand more from eCommerce or retail brands.

Today’s tech-savvy, digitally empowered consumers want brands to offer a valuable shopping experience while reaching out to them with a personal touch. Properly segmenting your customers can help with this.

Let’s understand the concept of customer segmentation and how you can use it to improve customer loyalty, grow your audience, and boost sales.

What is customer segmentation?

Ninety-one percent of consumers will shop with brands that provide relevant offers and product recommendations. If you know what your customers want and need, you can connect with them in a way that offers genuine personal value. As a result, you’ll be more likely to earn a sale (or repeat sales).

Customer segmentation is the process of creating different groups of your customer base and categorizing them according to demographics, shopping preferences, or distinct characteristics, usually based on market research and your online store’s data.

You could, for instance, segment your customers into groups such as repeat customers or customers that prefer shopping in-app. You can also segment them based on age, location, occupation, shopping habits, or even personal interests.

Why should I segment my customers?

Now that you’re up to speed with the concept of customer segmentation, let’s look at the benefits:

Segmenting your customers will help you create communications or marketing campaign messaging that appeals to specific members of your audience. Making your messaging more value-driven and less generic will result in more conversions.
By taking a personal approach to your content and communications, you will boost your brand reputation. In turn, you will reach more customers, earn more trust, and enjoy more sales.
Through customer segmentation, you can take an analytical approach to your business strategy by identifying strengths and weaknesses within your audience. By arranging customers into groups, you might discover a segment of your audience that you’ve neglected and create a marketing campaign to engage them with your brand.
Retail and eCommerce businesses that segment their customers enjoy an average 71% return on investment (ROI) from their email marketing efforts alone.

How to segment your customers for retail & eCommerce success

By taking a strategic approach to how you segment your customers, you will meet your consumers’ needs head-on and accelerate your business growth.

These are the steps you should take for effective customer segmentation:

1. Know your customers & define your goals

Before you start to place your customers into groups, you need to give your sales and marketing strategy a clear-cut direction.

To do so, you should create at least 2-3 customer profiles—or buyer personas—that represent your model customers. You can use these profiles as working templates when deciding how you’re going to segment your customers (and, later down the line, how you’re going to communicate with them).

Once you’ve created your personas, you will be able to define your goals. Do you want to boost sales in certain product categories or improve your customer loyalty rates? Perhaps you’re looking to enhance your email marketing engagement?

Consider your core goals to lay solid foundations for your customer segmentation efforts.

Resource: Read our definitive guide to creating effective buyer personas for your business.

2. Map your customer journey

Armed with your buyer personas and customer segmentation goals, you should take time to consider the bigger picture.

Customer journey mapping will empower you to see how shoppers interact with your brand across all channels and touchpoints. When you gain a panoramic view of your customers’ experience, it will become clear where you should aim your customer segmentation efforts.

Once you’ve mapped out your customer journey, you can establish which channels (email, social media, landing pages, category pages, mobile app, checkout journey, etc.) you will need to consider when communicating with different segments of your audience.

Today, focusing on one or two channels isn’t good enough—you need to offer tailored messaging at every stage of a shopper’s journey. This jargon-free customer journey mapping tutorial will help you get started:

Resource: Read our five essential steps for boosting your brand’s customer experience (CX).

3. Get analytical

Now that you’ve created your personas, set your goals, and mapped out your customer journey, it’s time to dive a little deeper into your data.

To segment your customers into groups that will benefit your business, you should consult your store’s data to gain a better insight into how your audience interacts with your business.

By working with a mix of demographic information (age, sex, location, etc.) and behavioral data (e.g., shopping, browsing, and buying habits), you can create names for your customer groups and start to populate them.

Working with your most relevant metrics using Google Analytics or your store’s built-in data analytics platform will allow you to segment your customers swiftly and effectively.

Here are ways you can segment your customers using your buyer personas and data:

Demographic: These customer segments could be arranged by age or generation; occupation type; education; income; sex, or marital status. You can also drill deeper by combining demographics—for example, millennials that are married or female college graduates.
Geographic: To create regionally targeted marketing campaigns, you can segment your customers according to location. Doing so will help you create content and offer deals, discounts, or recommendations that are likely to suit the local climate, surroundings, or culture.
Lifestyle or interests: Similar to demographic segmentation, you can also consult your personas and data to create groups according to lifestyle or personal interests. For example, you might want to create a group named outdoors types and another named lovers of city breaks (of course, the way you arrange and label your groups will depend on who you are and what you sell).
Browsing behavior: Your store’s engagement and browsing data will tell you a lot about your customers. If you look at past browsing or buying history, seasonal shopping habits, or order value, you could create segments like customers with a high order value; repeat shoe sale customers; customers that shop in-app, or Halloween shoppers.

If you follow the steps correctly, you will be able to use your personas, goals, mapping information, and data to get as detailed as you wish with your customer segmentation efforts. It’s possible to combine elements of all four segmentation types mentioned above and get super specific with your campaigns or communications.

Resource: Get to know your customers and competitors even better with our guide to social listening.

5. Target your customer segments

Once you’ve arranged your customers into neat and effective segments, you should put theory into practice.

At this point, you can pick a customer segment that you feel will offer the most value if targeted first and decide how you’re going to reach out to them depending on their demographics, browsing behaviors, or interests.

Whether you target your segment on one channel or are looking to create a wider marketing campaign, you should consider what this group of customers wants and needs.

Once you’ve established what information, products, and services will resonate with your customer segment the most, you can start building content that will offer personal value.

Here are some resources to help guide your campaign content:

6. Rinse and repeat

The online world is always changing—and so are your customers. To ensure your customer segmentation efforts remain relevant and valuable, you should repeat this process periodically, making tweaks, updates, and refinements where necessary.

That way, you will always meet your customers’ needs head-on while appearing personable, approachable, and above all, more useful than your competitors.

Working with the right tools and solutions

We hope this practical guide to customer segmentation helps your business thrive. If you need a better solution for managing your online store and tracking your data, we can help.

Contact us to find out about what we do, and we’ll be happy to answer all of your questions. We look forward to hearing from you.