4 key customer segmentation methods for laser-targeting your e-commerce audience
Today's article is a guest post from digital marketing strategist Tracy Vides. Enjoy!
Over 80% of global consumers have shopped online at least once. For large enterprises and startups alike, approaching customers for your e-commerce strategy is far from a one-size-fits-all project. Website visitors can come from a wide array of sources and have vastly different shopping habits and characteristics.
The best way for e-commerce companies to boost conversion rates is to build powerful and profitable relationships with the audience. Using your existing web analytics, you can divide your visitors based on certain criteria to customize the brand experience to their wants, needs, and concerns.
The internet has completely changed the way customers interact with brands. Consumers have come to expect a personalized experience, but marketers still have a long way to go.
Segmentation allows brands to define their audience and focus on valuable customers while reeling in new prospects. As opposed to creating a marketing strategy with a broad appeal, segmentation can help gear your efforts to specific groups sharing similar characteristics, since narrower targeting leads to more ROI.
Let’s look at some important segmentation types to take into account when optimizing your e-commerce platform.
Perhaps the most basic form of segmentation is based on demographics. This includes customer criteria such as:
Marketing to different demographics is a result of an evolving society. Different groups are receptive to different approaches and have different ways of absorbing brand content.
For example, younger generations are more likely to prefer visual content such as video or infographics and are more likely to consume content on their mobile devices than older generations. Also, 90% of adults aged 18-29 use social media, whereas only 35% of adults over 65 do.
With these demographic insights, you may decide to use mobile video content to reach a younger audience.
One of the biggest advantages of demographic segmentation is that all the information you need is readily available from census data. Based on the nature of your business, your e-commerce strategy should reflect the characteristics of the target demographic.
However, demographic targeting is one of the methods most prone to inconsistencies – not from the point of view of data accuracy but owing to oversimplification of customers’ perceived needs. The factors at work here are:
- Cultural assumptions: Location, culture, environment and personal experiences have a large influence on the consumer and demographic data has little meaning until you take into account these nuances.
- Change of circumstances: People will age, move to a higher education or income bracket, and get married or divorced. These life events will lead to churn in your targeted segments.
Therefore, companies need to be careful not to follow a one-dimensional approach and pigeonhole customers based on incidental characteristics. You need to get more information on what they believe and how they think and act.
Behavioral segmentation separates customers based on the way they respond to your e-commerce platform. This is a subject that requires an in-depth study over time. There can be many factors that come into play when a consumer is making a decision. These factors influence consumers’ individual and collective behavior, which needs to be analyzed. And then consumers have to be segmented by their traits, preferences and past behavior. Some of the basic forms of behavioral segmentation include:
- Purchase occasion: Consumers purchase different products for specific events. This can be an occasion such as a birthday party or a festival. Think of this type of segmentation in three groups: universal occasions, regular personal occasions, and rare personal occasions. Hallmark Cards is a perfect example of a brand that runs targeting campaigns based on specific events. Their primary objective is to have a card for every occasion whether it’s a holiday, wedding, graduation, you name it: Source
- Sought out benefits: This approach encompasses a marketing strategy that targets buyers based on the value they seek to gain from a certain product or service. It goes beyond demographics and identifies the key attributes that draw customers in. For instance, if a car manufacturer determines that buyers with higher incomes value cars with leather seats, they can use more variables of that nature – such as leather upholstery, dashboard, and gearbox covers – and promote luxury while marketing to that segment. On the other hand, they might market models with more boot space and broader seats to buyers with large families.
- Rate of product usage: This approach is based on the frequency that consumers buy from a company. It ranks them from light users to heavy. Let’s say you run an e-commerce platform that sells computer parts. If one of your clients is a document-driven enterprise that buys a high volume of HP printers each year, you can use that behavior to present discounts or deals on cartridges at specific intervals or times of the year.
Your customers’ behavior gives you the best insights you can use to boost sales and target the right groups at the right times. With this knowledge, your strategy will be much more efficient and effective.
Geographic segmentation is a very common approach to dividing your market based on location. Shoppers in different areas often have very different needs, concerns, and shopping patterns. With this information, you can change the positioning of a certain product in specific ways pertaining to that region. For example, if you’re starting an online shop retailing apparel, you wouldn’t want to promote parkas or stocking hats in Southern California; a promotion on t-shirts or swimsuits would be much more likely to succeed.
According to the Global Location Trends Report launched at SXSW, 75% of marketers say location based marketing plays a crucial role in their business.
Apart from being a relatively simple task, there are several benefits of geographic segmentation.
- It’s a targeted approach: geographic segmentation hits the nail on the head by catering to the precise needs of certain audiences based on their regional culture, weather, and regulations.
- It’s very effective for small businesses: properly allocating your budget as a small business is one of the biggest challenges you will face. You can use this information to create limited but precise marketing campaigns and reduce money wasted on global but generalized strategies that lead to meager results.
Breaking down visitors by location can be very helpful in identifying certain behaviors. The ability to localize your e-commerce platform can do wonders to enhance customer experience. You can use a tool like Optimizely to target specific visitors based on location. Of course, there is the risk that people might have moved (or be “on the move”) when your message reaches them, but online targeting tools are very good at pinpointing customer locations in real-time.
This concept is based on the interests and opinions of consumers. It dives into the identity of the customer and customizes the UX to the type of person they are. Psychographic segmentation can be broken up into a few factors:
- Lifestyle: Consider what phase of life your customers are in. For instance, a college student lives a completely different life than a senior citizen, and someone living in a rural area has much different needs than someone living in a place like New York City. People of different lifestyles also have different ways of consuming content and different levels receptiveness to brand messaging.
- Social class: Based on the socio-economic scale, different consumers are associated with different social classes. This affects buying power. Typically, the customer’s buying habits will reflect their class. A higher income class would be more likely to be interested in luxury items whereas a lower class would be more focused on basic products or be on the lookout for price deals.
- Opinions, hobbies, and interests: There are many factors that collectively make up this group, including views on religion, the environment, or interest in things like sports, arts, or culture. The attitudes and values of customers can have a huge impact on what kind of products or services they buy as well as how they respond to marketing techniques.
Psychographic segments are some of the most valuable criteria you can use to individualize your marketing strategy and even can even play a big role in how you design your e-commerce website. This type of segmentation tends to be a bit more expensive than other approaches. However, dividing prospects into meaningful groups based on the choices they make is extremely valuable in determining a message that will resonate with them on a deeper level.
Let me explain with an example: Whole Foods gears their marketing efforts around the central assumption that their target audience values a healthy lifestyle and is willing to pay more for it. In turn, their content is focused around diets and routines that offer the most health benefits:
Naturally, the recipes on their blog use Whole Foods’ products as ingredients. This is psychographic targeting at its finest.
Over to you
E-commerce businesses face a lot of challenges. The good news is that businesses today are equipped with a lot of great tools and techniques to analyze customer behavior, segment them neatly, and cater to their needs at an individual level. The ultimate objective of online customer segmentation is to understand your target market and maximize your conversion rates by positioning your products with contextual branding and marketing approaches.
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Tracy Vides is a digital marketing strategist who works with small businesses and startups to help improve their content, SEO, and social presence. Tracy is also a prolific writer—her posts on ecommerce, social media, and conversion are regularly featured on tech blogs across the web.