In this project, mainconstituent will be segmentation of customers and products. Dealing with thecustomer complaints and with the analysis of deals will rise abovesegmentation. For better understanding what is customer segmentation, how companiescan get benefit from it and which factors should be considered when doing aprocess of segmentation will be explained in the upcoming paragraphs. In online marketing,customer segmentation refers to the process of using customer data to enable a clustering(it will be explained in upcoming chapter) of customers with shared attributesso that communication can be customized to express diverse methods. This sectorconsists of mostly sending messages, showing advertisements to customers at theright time in the right place.
Thisis because people tend to respond better and give greater value to yourbusiness when they feel their needs and interests are being specificallyaddressed in that customized communication and segmentation, thus it will behelpful to reach this goal.There are several waysthat a company can benefit from the segmentation. First, e-commerce firms reachtheir target customers when the firms messages match customer interests andpreferences. Moreover, gaining new customers is harder and more expensive thankeeping current ones.
By focusing on loyalties of each customer and theirshopping choices, long term revenue can be increased by customer retention. Inaddition, keeping current customers by examining the performance of each customersegment, companies can get instant status of their customer base and getprecious insights such as observing trends and patterns, while observing whatis working and what is not, and being aware of how company’s strategy is goingforward.An online retailer shouldtake in account some factors when they accomplish segmentation, which helps themto create new strategies. These factors can be demographic, concerning customerlifecycle and related products. The most basic segmentation can be made bylooking at demographic differences such as gender, age, location, and educationlevel. Furthermore, when customerlifecycles are analyzed distinct categories can be seen.
Secondly, in customer’slifecycle segmentation, the relationship of customer and website should beexamined. In this relationship there are several approaches such as recency,frequency, lifetime value, and marketing engagement.a) RecencyRecency refers to thelast time somebody shopped with you. Though the boundaries you set will dependon what type of business you’re running, you’d typically want to segment yourcustomers into the following:· Active – those whohave shopped recently, e.g. in the last 6 months· At risk – thosewho have previously purchased from you, but have not returned to make apurchase in that timeframe you’d usually expect (e.
g. between 6 and 12 months)· Lapsed – thosethat have purchased previously but have gone way beyond the point you’d usuallyexpect them to return to make another purchase (e.g.
12 months +) b) FrequencyFrequency refers to how often somebody has shoppedwith you.· Prospect/lead -someone who hasn’t shopped with you at all· One-off customer -somebody who has made a single purchase from you· Repeat customer -somebody who has made more than one purchase from you· Loyal customer -someone who has enough times to be considered ‘loyal’ (usually 3 or 4) c) Lifetime valueIt’s also important tolook at the amount that customers spend with you – after all, there’s anenormous difference in revenue gained from a regular shopper who only buysdiscounted products and one who consistently buys high-value items.Usually aVIP/top/medium/low scale might suffice, ranked either by average order value(AoV), historic customer lifetime value (CLV) (i.
e. the total amount that acustomer has spent with you), or even predictive CLV (a projected view of howvaluable a customer will be to you). d) Marketing engagementWhile purchases areall-important, marketing engagement is one micro-conversion that should alsoaffect how you segment your customer base. For instance, you may want to take adifferent line with an ‘at risk’ customer who is still active on-site andbrowsing to one that you haven’t seen at all and hasn’t clicked on anymarketing messages.When we talk about’marketing engagement’, we refer to factors such as:· Whethersomeone has opened/clicked through from an email· Whethersomeone has clicked through from a retargeting/social media ad· Whethersomeone has been active on-site.For example, you mightsegment into two groups:· ‘Warm’- those who are engaging with your marketing/have been active on site· ‘Cold’- those who are not engaging with your marketing and haven’t browsed on-siteLastly but mostimportantly for segmentation, finding products found interesting by customersis essential to persuade customers and increase profit. Using data from anindividual customer’s behavior, and from trends in your customer base, it’spossible to personalize your suggestions by segmenting based on:· Productsor categories viewed · Productsor categories purchased· Productsor categories most likely to result in cross-sell which means being able toshow complementary products.As a result, segmentatione-commerce companies can make lots of actions.
For example, for VIP customers which are particularly valuable to you,some special campaigns can be made to strengthen their loyalty and make thesecustomers feel exclusive such as private events and previews. In addition toextraordinary events, with help of the segmentation triggered advertisementscan be made. Since each customer’s liking, needs and ways to be influencedcould be guessed by segmentation; companies will only focus on small groupsspecifically to seduce.