18 Customer Segmentation Examples for Online Marketing
Customers are demanding a more personalized approach from businesses. In 2020, Forbes collected extensive research from more than 20 companies concluded the majority deem personalized a necessity. For businesses to be more personal, they first need to learn how to segment their customers when they deliver their marketing messages.
Table of Contents
- What is customer segmentation
- Why is customer segmentation important
- Types of customer segmentation
- Best practices of customer segmentation
What is Customer Segmentation?
Shopify defines customer segmentation as “the practice of dividing customers into groups based on common characteristics so companies can market to each group effectively and appropriately.”
Why is Customer Segmentation important?
When it comes to marketing, having the right customer segmentation can lead to many benefits such as higher customer satisfaction and loyalty. In addition, according to Econsultancy's report, 80% of the business reported an increase in revenue after personalization was used.
Here are three main reasons why customer segmentation is important:
1. Increase understanding of your customers
By segmenting your customers, you can have a clearer understanding of your customers. Rather than looking at your customers as a whole, with segmentation, you can easily identify customers that are driving the revenue.
2. Staying Personal
With users becoming more and more familiar with online technologies, they are currently demanding more personalization treatment. Research by SmartHQ found that 70% of the millennials are frustrated with brands with irrelevant emails, and 74% of customers frustrated when website content is not personalized. By segmenting customers, you can better personalize your offers to your customers.
3. Better marketing strategies & Results
Doing segmentation right also allows executing marketing strategies that you never knew possible while ripping the benefits. Research has shown 88% of the marketers in the US reported a measurable improvement and a 15% increased in revenue after launching their personalization initiatives.
Types of Customer Segmentation
There are many ways to segments your customers, and here are the six main types of customer segmentation.
- An area
- Mobile Devices
- Internet Browsers
- Browsing history
- Purchase history
- Average Order Value
Customer Journey Based Segmentation
- Where customers are in the purchase journey based on past behaviors
Samples of Customer Segmentation + strategies
1. User Attributes + First page
Send messages based on users’ attributes. If they are a first time visitor, you can show them a pop-up on how to navigate through yourself. One of our clients, COEN, reduced the bounce rate by 10% when they deliver a banner to prompt new users to visit their site homepage when they enter the site from different places.
2. Inactive users
Delivery marketing messages that recall your visitors/users. This can be set as last 1 day, 3 days, 7 days or 28 days, depending on the nature of your business. This can be executed through Push Notification for Apps and re-marketing.
For example, HaruHaru, a female media company, reported a 10% improvement in retention rate after they launch the last 6 days, 10 days and 30 days campaign to re-engage with their inactive users. A recommended way to increase user retention is by conducting a Magic Number Analysis.
3. Location (Area, City or Country)
Location segmentation is critical when your business has a limited reach or have a local promotion. The last thing you want your customers to receive is a promotion in Malaysia when they live in Singapore.
Location marketing makes things seem more personal and relevant. With the right execution, it can make customers will feel very special, especially when they are from a small town.
4. Purchase Information
Segmenting your customers based on purchase information might be one of the most crucial segmentation out there. When done right, with the right purchase information can help you easily upsell and cross-sell your products.
5. Coupon history
Segmenting your customers based on the history of their coupon might be a good reason as they might be your segment who are more reactive to upcoming sales or a coupon announcement.
Pairing this segment with a referral program and they might become one of the most proactive ambassadors for your brand.
6. Type of subscription
If your business sells subscription service, it is important to segment your customers based on the subscription plan they are one with you. This allows you to better upsell or deliver a more relevant message to your customers.
7. In-App interaction
If you are in an App business, segmenting your customers based on how they interact within the App is crucial. Do they choose a male or female game characters? Your marketing messages should differ based on their choices.
8. Abandoned Cart
Sending abandoned emails to recover your sales should not even be a choice, as this is one of the most studied marketing strategies out there. Studies have shown that E-commerce has an average cart abandonment rate from 56.8% to as high as 80.3%.
9. Video Engagement
Segmenting your customers based on the percentage of video engagement, such as the percentage of the video watched and seconds watched are important when you like to gauge how engaged your customers were. This is important to crucial for businesses who like to dive into video marketing and optimize their video length for results.
Wishlist, like a shopping cart, can be a very good indicator of what your users are looking for. Businesses can deliver emails, web push, or SMS to this customer segment if the item in your wishlist is running low in stock or when they are back in stock.
11. Time of the day
Sending your customers the right message at the right time is crucial to your marketing success. There is why so many technologies out there like the Instagram report that tell you what’s the best time to share a post or drop an email.
12. Log-in / sign-up
Encouraging visitors to sign up and log-in it’s essential to get the most accurate data out of your visitors. As these days, visitors can be visiting your website across multiple devices, the best way to verify if they are the same user is by having them sign into their account.
13. Mobile Phones
Devices are one of the easiest customer segments to create, and it should be utilized if it’s relevant to the nature of your business. This is especially true if your product is device sensitive such as phone holders, cases, or software that can only be run on specific operating systems.
14. Customer Journey
Knowing where your customers are right now with your business crucial for loyalty. Segmenting for customer journey usually requires first mapping out the usual path customer takes from discovering your business to become the most loyal customers. More details on how to map out a customer journey can be found here.
15. Engagement Level (email, push notifications)
Based on your customers’ engagement level, you should devise a special promotion targeting inactive customers to re-engage with them.
One of our clients, Mobile Factory, launched a very successful campaign targeting users who have been inactive at their App for more than 30 days. The result of the campaign ended reactivating users who have been inactive for more than than a year.
Depending on the nature of your business, knowing the segmenting customers based on the weather conditions they are experiencing might lead to higher revenue. Tesco is one of the most famous retailers out that utilize weather conditions to stock their foods.
17. Acquisition Path
Segmenting your customers based on how did you first acquire these customers are important for a higher level of engagement. Were they introduced by friends or family? Or did they become your customers because an influencer recommended your business? Based on how these customers were acquired, your business can might wish to re-evaluate marketing strategies based on customers source.
18. Loyalty level
Last but not least, the loyalty level. Based on the loyalty level of your customers, you provide a special promotion or gain more of their loyalty by giving out special loyalty cards for top spenders.
Best Practices of Customer Segmentation
Eighteen ways how businesses can segment their customers have been listed up, and based on these segments, companies can conduct in-depth analysis and marketing to improve their business performance. However, while conducting segmentation, these are some guidelines that should be followed:
1. Know what is important to your business
First, it’s important to know what is most important to your business. Doing weather segmentation might not mean anything if you are selling a plane or a car.
2. Know your customers
Segmentation should be done after knowing who your customers are. Based on that, create segments that most relevant to your customers.
3. Set goals
Goal setting is crucial to know what kind of customer segmentation is required and what goal to aim for. Your goal can be turning 10% of the inactive users into active users within 30 days. Set your goal and define them to make it measurable.
4. Don’t over-segment
Do not create a customer segmentation that leads to a small audience size as the effort might be wasted due to a low number of customers within the segment. The result might be too insignificant when compared to the time and money invested.
5. Test and optimize
Lastly, test and optimize if the segment is really working. If you have two customer segments and only send a marketing message to one of these segments, even it leads a positive result, it does not mean the other segments might not yield any result as well.