In e-commerce, customer segmentation refers to the use of customer data to divide customers into groups that share the same behavior and characteristics such as gender, taste or shopping patterns, interests, and more.
Segmenting customer base helps in better understanding the customers and thus 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.
Here are some of the key benefits that customer segmentation brings to online retailers that incorporate it into their marketing strategies:
Higher conversion rates
Customers are more likely to buy from you when your marketing messages are relevant to their circumstances and interests.
Long-term revenue from customers
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 contextual is a key driver of long-term profitability. By knowing products your customers buy over their time, their Customer Lifetime Value (CLV) could be calculated and appropriate retention strategies could be implemented for every segment.
Better insight into your customer base
Examining the performance of certain customer segments provides important insight into the health of your customer base, enables you to spot trends and patterns in what’s working and what isn’t, and can help inform your strategy going forward. Segmenting customers by-products could yield deeper insights into the buying behavior.
Helps in Acquiring Customers
Discover high-value and low-value segments and adjust your acquisition marketing accordingly. Manage limited resources efficiently by focusing efforts on the customers who are more likely to buy your product.
Improve Customer Satisfaction and retention
- Make customers feel they are special and that they are always getting a deal.
- Tailor and develop existing products and services to meet the particular needs of a certain segment.
- Solve and compensate for problems and ensure complete satisfaction.
- Understand your customers’ needs and base your recommendations accordingly.
- Have more effective targeted and timely marketing messages.
- Increase customer retention and loyalty.
You can Also Read: Mining the CRM Data for Customer Segmentation & Customer Knowledge
– Akhil Ram Adapa, Team member @ Big Data Analytics Practice, Cappius