The Ultimate Guide to Ecommerce Customer Segmentation

Danny Wong

6. How experts recommend getting started

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“Start small and with a single key variable,” suggests marketing expert Chris Hexton in an article for Marketing Land. A quick way to sabotage any real momentum you have is by overcomplicating the issue. For instance, you may use simple segmentation criteria such as customer location or customer lifetime value. Using the examples above, you may split your customer list into two by asking:

  • Is this customer local or international? OR
  • Which customers have spent at least $200 with us? Which ones haven’t?

In each of these, the single variable provides you with leverage in future marketing efforts. Thus, you can develop marketing campaigns that specifically target domestic customers and create completely different promotional ads for overseas buyers. For loyal shoppers who spend hundreds of dollars with you, you may want to offer always-expedited shipping and VIP customer support. For the rest of your customers, you may want to send exclusive coupons and discounts to encourage repeat purchases.

When you measure each of these marketing efforts independently, you will also begin to notice marked increases in your overall marketing performance. If after a few weeks or months you have enough resources to segment your customer list further, Dave Chaffey lists six broad customer segmentation strategies you can try:

  1. Demographics
  2. Customer lifetime value (LTV)
  3. Lifecycle groups
  4. Purchasing habits
  5. Multi-channel behavior and lead source
  6. Customer personas and psychographics

Before you fully invest in catering to any particular customer segment, Harvard Business Review editor Gretchen Gavett recommends evaluating the opportunity based on six criteria:

  1. The customer segment is identifiable. There are clear defining traits of your selected customer segment, and it is easy to measure their reactions to certain marketing campaigns and their purchasing behavior. As mentioned earlier, you may use demographics, customer lifetime value and more to label each customer segment.
  2. The customer segment is substantial. It is expensive to market to each customer segment, so make sure any group you focus on has enough members who can drive meaningful revenue. Management consultants at Bain & Company recommend, “Determine the profit potential of each segment by analyzing the revenue and cost impacts of serving each segment. Invest resources to tailor product, service, marketing and distribution programs to match the needs of each target segment.”
  3. The customer segment is accessible. There should be clear ways to communicate with these customers at scale, whether it is over email, social media or display advertising. Splitting your email list based on customer lifecycle is easy, however sharing targeted posts with your fans on Facebook can be hard without using the company’s advertising tools.
  4. The customer segment is stable. The definition for your customer segments should not change frequently. Dynamic customer segments tend to negatively impact the performance of your marketing campaigns.
  5. The customer segment is differentiable. Each of your customer segments should have distinct communication preferences and unique needs that they want stores to directly address. Marketers may want to consolidate groups that share the same communication preferences and needs.
  6. The customer segment is actionable. You should be able to design products these customers want and execute promotional campaigns that actually mobilize these buyers to take action.