Customer Segmentation at Christmas: How Ecommerce Retailers Can Slice Up the Festive Season

Posted by Victoria Elizabeth 11 Nov 13

shutterstock_115294060Consider this: A savvy businessman goes onto genericfashionshop.com to find a dress shirt. He finds some items he likes, puts them in a wishlist, and then considers trying them on in a shop during lunch the next day, so he quickly exits the website without a purchase.

Consider this: A young woman purchased some items from genericfashionshop.com last year just before Christmas, and hasn’t made any purchases since then. She only wanted that kind of speed and convenience for the holidays, but enjoys shopping in-store much more.


Now consider this
: genericfashionshop.com decided it would begin sending out Christmas email campaigns this same week, and without segmenting customers, made a generic email that included a little bit of everything - since Christmas is the time to spend money on others after all. So both our savvy businessman and millennial woman got an email in their inbox at the end of the week and both of their reactions were immediate - DELETE.

Deleting irrelevant emails is easy, no matter what the reason. So what should genericfashionshop.com have done? The answer is… drumroll please… segmentation!

Digital marketers know that there is a myriad of different ways to segment customers, and finding the best ones can be difficult. Targeting customers in email campaigns through segmentation is key to distributing relevant information to those customers, improving your click-through rates and increasing purchases.

In this post, I will explain why, how and when online retailers should segment customers, and since the holiday promotions are in full swing now, I’ll outline the 4 segments I believe you should focus on to make this year’s company Christmas party even more merry!

Why Segment, and Why Aren't More Retailers Doing It?

The funny thing about segmentation is that it sounds easy enough - find customer, add customer to email list, send email - but the reality is that without the right tools, this can be very difficult to scale. This is the biggest reason why retailers are largely ignoring this vital marketing activity, and getting executive buy-in makes adding customer analytics to the marketing budget a delicate conversion.

For those using the vanilla flavour Google Analytics, they have no ability to identify individual customers. However, the reason to go through the trouble of segmentation is visible in the data. As little as the top 1% of your customers can spend as much as the bottom 50% put together. That’s huge! Segmentation greatly improves click-through and purchase rates, as well as company clout for looking so savvy to customers.

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How to Segment Email Campaigns

Step 1) Define your goals - As with all things in business, start with where you want to end, whether that means improving your bottom line, setting holiday promotions or increasing brand awareness.

Step 2) Set benchmarks for segments - Settings benchmarks is essential to getting to the right customers. Make sure to analyse your customer base first, and divide it up based on data that backs your decisions. You won’t always get this right on the first try, so make sure to test and reiterate periodically for each segment. This is not a set and forget activity!

Step 3) Make segments - Once you have your goals in mind, and set your benchmarks, it’s time to segment out those customers you want to target. This is where an analytics platform like our own can come in handy, but there are a number of other tools available.

Step 4) Optimise targeting messages for each segment - Once you have your segments made, you can import them into your email marketing platform. Some platforms, like Mailchimp, allow you to set segments for emails already, but you need to data first to support making them.

Step 5) Time it just right through scheduled and triggered emails - Timing is of the essence when it comes to sending targeted emails. Choose the best date and time to send emails to your customer segments, and decide whether your segments should be targeted with scheduled or triggered emails.

Step 6) Measure, rinse and repeat - This process should be closely observed, recorded and analysed for improvements to each segmented campaign. And once you have more data on how well you did to reach your goals, you can use what you learned to do it again!

 

How Many Segments Should a Retailer Have?

There are many many ways to segment customers, but here are the three main categories that I want to highlight:

Product-based

  • RFM Analysis - repeat and high AOV customers
  • Inactive customers - dormant revenue opportunities
  • Date of First/Last Transaction

Customer behaviour-based

  • Date of First/ Last Visit
  • VALS - Values, Attitudes, Lifestyles

Source-based

  • Domain
  • Campaign

While there is no easy answer to how many segments are needed for all retailers - since no two companies are exactly the same - there are some segments that will work better for ecommerce retailers, and for holiday promotions. To effectively segment your customers, you need to fine-tune your knowledge of your customers, and repeat the process to get higher levels of accuracy.

For Christmas 2013, you will want to focus on these 4 product and behaviour-based segments:


1) Products Viewed

Segmenting by products is an easy and effective way to retarget customers who have abandoned their baskets. Remember the first example above of the savvy businessman? If genericfashionshop.com had segmented out customers who viewed a product but abandoned their basket, and retargeted them with an email the next morning (that maybe included free shipping), the likelihood that this customer would have returned to the site to purchase would be much higher than if they saw a generic Christmas sale promotion in their inbox a week later. The same can easily be done for high priced items, promotional items, and popular categories that your ecommerce store sells around Christmas.


2) Procrastinators

Ah, the procrastinators. A lovely bunch who like to wait till December 21st to place a huge order and get it express delivered. They spend a fortune collectively on shipping alone, so why not target them this year, with an offer to waive express shipping fees for a short period before Christmas? Again, the example of the millennial who only bought during Christmas would fit this category, as she would reconsider waiting till the last minute if she had a list of prior categories viewed with an enticing savings on shipping added in.


3) High AOV Customers

Segment out customers with the highest Average Order Value, and set the dates to within 90 days of Christmas to get a list of high Christmas spenders. Target them with special offers that cross and upsell popular products. They will be more likely to use this information to guide their shopping and appreciate the thoughtful email that cuts their research time.


4) High Lifetime Value Customers

These are your crème de la crème customers. They have been spending a healthy amount consistently over a long period of time, so they know your store, and are familiar with your products and policies. Make them feel extra special for being in this exclusive group with offers made just for them. Gift bags, free next day delivery etc. are just a couple examples of how to help your big spenders spend more this year.

 

Customer segmentation at Christmas: Takeaways

If you decide to use customer segments this holiday, keep in mind what you hope to achieve with them, and above all, stay customer-focused. Putting in this much effort for your customers to have a more personalised and relevant experience will pay off, no matter your size or industry. Some things I haven’t mentioned but that are important to consider are your privacy policy for using customer emails, as you don’t want to spam them. And another is checking whether your customer IDs correspond to several different email addresses. Keeping this in mind will decrease the likelihood of doubling your efforts and annoying some important customers.

Well, I’m out of breathe. Hope this post was helpful, and please tell me if you have any other insights into customer segments for ecommerce.


Happy segmenting!

 

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Topics: Ecommerce marketing strategy, Ecommerce marketing tips

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