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How to Segment Your Customers Based on Sales Data
  • April 17, 2019|
  • 5 minute read
How to Segment Your Customers Based on Sales Data

One of the biggest mistakes an ecommerce company can make is to view each one of its customers as equally valuable. While a glance at a customer database might make one field seem no different from the next, it’s mission-critical that any company with ambition digs deeper into the data to find how best to segment its customers.

Segmentation is vital because it allows careful optimization of everything from marketing to support. Instead of providing a monolithic service that doesn’t fully satisfy anyone, you can operate with more flexibility, offering something different to each customer segment.

But how do you go about segmenting your customers using your sales data? What metrics are the most important, and how can you use segmentation to improve your business? Let’s answer these questions.

Ensure that you have all the data you need

Ensure that you have all the data you need

Channel attribution allows you to know where your customers are coming from: which channels they’re finding you through. If you engage in a standard complement of marketing tactics — e.g. email marketing, social media marketing, PPC advertising, referral marketing — then each one should be clearly marked in your sales data (if it isn’t, you’ll need to configure this: here’s a guide to help you get started).

And then there are the various pieces of customer data that you should be collecting wherever possible. Names, email addresses, phone numbers, locations… the more information you’re storing, the easier it will be to usefully segment your customers. If your sales data is thin to the point of barely storing any such information, then you won’t be able to do any meaningful segmentation until you’ve updated your system and waited for some data to accrue.

Look for meaningful patterns and associations

Look for meaningful patterns and associations

Segmentation can be done as widely and as arbitrarily as you prefer, which is a major problem when you’re trying to yield valuable connections. For instance, you can draw a line between “Women aged 22-24” and “Women aged 24-26”, but there’s no point in doing so unless you have a compelling reason to think that those groups will have clearly-distinct needs and actions.

Instead, look very closely at the figures, and segment only along clear divides. Take the most important business performance metrics and filter them in various ways to look for standouts. For instance, here’s something to try:

  1. Divide customers based on lifetime spend (e.g. bottom 20% through to top 20%).
  2. For each set, produce a breakdown of all stored stats (sex, age, industry, etc.).
  3. Look for differences between the bottom and top sets — are they reflected in the others?
  4. Note down the biggest associations and use them to inform your next piece of analysis.

Let’s say that you discover that 50% of the customers who’ve spent the least with you are aged between 20 and 30, but that percentage drops to just 15% for the top-spending bracket. Regardless of the reason (likely a lack of disposable income, but not necessarily), this should lead you to consider doing one of two things:

  • Finding ways to target young people specifically. If it’s important to you that you sell more with young people, then you might need to rethink your brand somewhat.
  • Giving up on marketing to young people. If they’re not spending much money through you, it might be more cost-effective to market exclusively to older groups.

Once you’ve spent some time looking through charts and graphs, you should have assembled a fair understanding of which traits correspond with which levels of spend in your business. Some segments you’ll be able to disregard entirely, while others you’ll be able to focus on more intently. This will ultimately save you time and ensure that you work more effectively.

Offer customized experiences

Offer customized experiences

Now that you have a good idea of which segments you want to focus on, how do you segment your marketing? Firstly, you must confirm that your online platform is sufficiently strong and expandable to handle a heavily-segmented marketing strategy. Consider how something like Shopify’s enterprise ecommerce software (known as Plus) allows you to create personalized multi-channel experiences. After that, you must ensure that you can sync all the vital data to any and all pieces of software you intend to use for said marketing. Email marketing is a huge part of online promotion, for instance, and achieving an easy integration between your sales software and your email marketing software will make segmentation massively easier.

In fact, using integration to bring together all the disparate elements of your online operation will make it vastly simpler to aggregate data in general. Linking your support, CRM, and sales systems will make it possible to create well-rounded customer profiles, for example — profiles that you can then use to bolster your personalization efforts.

With all your data prepared, it’s time to create your customized experiences. Using the segment profiles you’ve established, think carefully about what each segment really wants from your company. More creative marketing? Clearer pricing? Higher quality, or faster service? Should you lean on images or text for your marketing materials? The more in-depth you can get, the more you can achieve.

Segmentation is a hugely-valuable part of growing a business. It allows you to operate more efficiently in your production, marketing, and support. Follow these steps when adding segmentation to your strategy, and you’ll stand a better chance of succeeding.

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Kayleigh Alexandra
Growth Hacking & Giving
microstartups.org
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