Top 10 Benefits of Segmentation for eCommerce

Customer Segmentation for your eCommerce brand is important but, interpretation of its benefits is much more vital. Customer Segmentation is the best criterion to know your customer better via which you can pitch your message better. 

Segmentation can be tricky and complex. However, segmenting your customers can provide tremendous returns when compared to ‘one-size-fits-all’ approaches and thus helps in personalizing marketing and communication for each segment. This is very beneficial because people tend to respond better and be of greater value to your business when they feel their needs and interests are being specifically addressed.

What is Customer Segmentation? 

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While mass marketing tactics are still able to get results, the assumption that simply everyone will be interested in buying what you are selling is a time-consuming, inefficient and expensive strategy. Successful customer segmentation clusters your customer data into groups sharing the same properties, in context to Demographics, Psychographics, Geographics and Behavioral factors helping to drive dynamic content and personalization tactics for timelier, relevant and more effective marketing communications. 

Why is Customer Segmentation Important?

A customer segmentation model allows for the effective allocation of marketing resources and the maximization of the cross and up-selling opportunities. When a group of customers is sent an email that is specific to their needs, it’s easier for companies to send those customers special offers. It helps you learn more about particular groupings within your customer base and how can you better reach them. So, segment your customers very carefully as your whole business plan depends upon your target audience only.

How Customer Segmentation can Benefit my Business?

Even if your business is driven by the highly targeted customer demography, there still will be variations between every individual customer. Recognizing these differences will allow you to tailor your approach to the needs of varying customer segments and allow you to effectively serve a wider group of people. 

Customer Segmentation prompts your brand to make optimum use of their marketing budget and achieve a competitive edge over your competitors and, importantly, exhibit better knowledge of your customer’s needs and wants. It can also help in:

Customer Retention & Better Customer Satisfaction

A personalized connection with your customers will always help you to win satisfied customers. Better Customer segmentation will lead to developing a better relationship with your prospective customers. Communicate with your customers on their queries & requests regularly and update about the new upcoming changes & opportunities to be availed of; This way customers feel they are special and that they are always getting a deal. You may need to apply a strategy in order to recover some of your older and more valuable customers who have not made any purchases recently. For example, when you’re trying to convert a prospect, your communication needs to be more informative. At this stage, they would prefer to learn about the solutions to their problems. In later stages, you may need to talk about other related products in your communication. There are many reasons why companies fail at targeting the correct customers and not having a strategic goal for customer retention is one of them.

Increase in Revenue

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Acquiring new customers is costlier than retaining the ones you already have. Focusing on increasing the lifetime value of each customer as much as possible by making your marketing more focused is a key driver of long-term profitability. By knowing products your customers buy over time, their customers’ Life Time Value (LTV) could be calculated appropriately. Therefore, try to focus on a limited number of resources that will help to serve and achieve your desired goals and that too at the most efficient cost since it helps in better allocation of resources. Understanding the social and financial status of your customers assists you to pace up with the price optimization as well. 

Many companies use the  80-20 rule, which can be applied to customer’s gross margins. This rule suggests that 20% of the customers are responsible for 80% of the profits of a company. On the other hand, Putting your efforts into the wrong segment can be more expensive to maintain.

Brand Awareness

The customer always loves the personalization of products and services. And sending out personalized emails is always a good idea. This way when they receive something that’s made just for them, they’ll feel more comfortable purchasing from your company because they know you care. This also builds brand awareness because customers will remember you as the company that sends them emails based on their interests, previous spending habits, and more. Through customer segmentation, you can make customers well versed with your brand. Identifying your brand will help your customers to directly engage with your products. This will increase your goodwill the market & a brand value will be established among your other competitors.

Effective Acquisition

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Customer segmentation allows you to learn a great deal about your customers so you can cater to their needs more efficiently and effectively. You can also tailor your communication depending on the customer’s lifecycle. Try to be as informative as you can be with your prospective client for guaranteed conversions since the client would prefer to learn about the solutions to their problems. You may also need to talk about other related products in your communication in accordance with Single Customer View and siloed data that will further help you get an accurate or informed understanding of your consumer base.

Also, manage limited resources and discover high-value and low-value segments and adjust your acquisition marketing more efficiently by focusing efforts on the customers who are more likely to buy your product.

Improves Channel of Distribution

Customer segmentation will improve your channel of distribution by knowing the right number of customers and directing the right channel of distribution. This will remove confusion among your team members about whom they have to deliver the product & at what time.

Thus, it will make your channel of distribution more precise and cost-efficient helping you serve the exact needs of your customers.

Allows You to Fine Tune Messages

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keeping in mind customer’s communication preference opt-ins, as well as which of your channels (such as online, through an app or in-store) they prefer and the time/day they are most responsive to your messages is beneficial in customer segmentation on the basis of contextual understanding. Segmentation of your customers also allows you to flesh out data which means that you are in a stronger position to easily identify trends or patterns. You can plan your further marketing objectives around the above-stated segments, that will personalize your marketing messages to communicate with different segments of customers, avoiding the “one size fits all” approach.

One should always also be diligent about sending out effective and timely marketing messages to their customers so that they do not miss out on anything big or new. It is not that bifurcating your customers into good and bad but in the different criteria as per their wants and pitch your message better. Fine-tuning your messages will also automatically result in an increase in your revenue.  

The bottom line is that customer segmentation can help you ensure that you send the right marketing messages to the right people and help you leverage the most effective channels and content formats so that your chances of conversions are greater.

New Market Opportunities

During the process of segmenting your customers into groups, you may find that you have identified a new market cluster, which could, in turn, alter your marketing focus and strategy to fit. Consumer segmentation helps in studying consumer behavior whilst making purchasing decisions, competitors, complementary products and services, industry, foreign markets, and environmental analysis that helps your organization identify new market opportunities. Using a variety of analysis will not only help your business gain a holistic view of opportunities but help create long-term strategic business plans as well.

Necessarily not all market opportunities identified will succeed but experimenting with them will give answers on the potential of each.

Improving Product & Services

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Product distributions strategies can be informatively shaped once you are able to identify where your customer’s shop and when, and what type of products are sold at particular outlets.

The question always is WHO wants to buy WHAT and WHY? Having a clear understanding of your customers’ needs will help you differentiate your company from the other competitors in the market as the best solution for the customer’s problem.

Enhance Competitiveness

Many brands use customer segmentation strategies as a competitive advantage. Contemporary strategy development includes concepts as targeting customers based on various factors. The determination of a viable target market is the first step and Positioning strategy is linked to the lifestyle of a customer. The fundamental basis of above-average profitability, in the long run, is a sustainable competitive advantage for your brand. 

It is crucial that customer-driven marketing strategies build the right relationships with the right customers in order to gain competency over other brands available in the market. 

Right Content Format

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Customer segmentation helps create the right content that your customer segmentation campaign will be based on. It is important to first talk about the overall importance of customer segmentation for your marketing strategy as a whole, especially your content creation since it all starts with content marketing so it’s important to keep customer segmentation in mind throughout your content brainstorming.

If you are going to start customer segmentation in your email marketing campaign, you’ll need to have customized content for those emails that will go to each group of users that you decide to target. This is highly specific content that can be targeted with long-tail keywords, which will get your detailed information to the users that will benefit from it the most.

So it is extremely useful for a few specific channels, to keep in mind for your overall content strategy because it helps you target your groups of users.

In a Nutshell

The workflow of Customer segmentation should be done very carefully as the whole business plan and brand’s financial standing depends upon the target audience solely.

Starting from the journey of retention and acquisition to drafting appropriate content for email marketing, everything is crucial so that by studying your customers and adapting to their preferences your marketing efforts don’t feel intrusive, but welcome and timely.

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