14 ways to segment your target audience for effective ecommerce personalization
Customer segmentation shows approaches to grouping prospects and customers to deliver more relevant communications and offers and so give better response rates to these communications.
In the marketing arena personalization is a term often misused for segmentation. Personalization and segmentation, while both valuable tools for marketers, couldn’t be more different.
The personalization v segmentation debate
Segmentation is grouping customers together according to identifiable characteristics. Often, these are demographic characteristics such as age, geography, or gender.
Personalization is the optimizing of experiences and messages to individuals themselves — not the group they belong to
The introduction of Articifial intelligence and machine learning algorithms can now predict website visitors’ likes of products, categories and brands based on similar users’ behaviour. Behavioral data from every single website visitor including views, purchases, searches and even time of day or amount spent. This data is then analyzed relationships are identifie between different customer segments and the products that businesses sell online.
Key benefits to segmentation
There are five key benefits to having a good customer segmentation when looking to improve your customers online experience through personalization
- Better match of your product or service offering to your customers segment needs. Creating tailor-made marketing initiatives
- Improve product or services offered – businesses can use market segmentation to identify what does work but more importantly what doesn’t work and alter accordingly
- Enables businesses to retain more customers by offering products that appeal to where customers are in their stage of life
- Allows business to grow their businesses by upselling on customers who have responded to introductory offers
- Businesses can enhance their profits through targeting customers who have a propensity to have more disposable income by raising their average selling price.
So where to start with customer segmentation?
Ecommerce personalization depends on the data sources your solution can access and personalize against. There are many types of data and segmentation options available in analytics and personalization that you can use to personalize with.
Below are fourteen of the most relevant segmentation options that can be used for personalization, some of which use anonymous data but some use existing profile information.
As well as standard segmentation options like those above, you should review solutions from your provider to create and save custom segments. Most established providers should be providing a minimum of 100 pre-defined segments on top of which you can create your own customized segments.
14 ways to segment your audience
1. Segmentation by referrer or traffic source
This means where the place where your visitor was prior to landing on your website. An AI-based personalization system can learn which offers work best for visitors from different sites, whether referral sites, social media, direct or from paid link ads.
2. Visitor type
For example, new visitor or returning visitors can be identified in analytics and in personalization systems. This is a commonly used technique for personalization, for example, offering new visitors a discount on first purchase or creating welcoming rewards for repeat purchasers.
3. Customer information
Customer segment information should be put into one of two categories. Segments are either profile-based or behavior-based i.e. what visitors have searched for on current and previous visits and/or purchase behavior which allows businesses to up-sell, cross-sell and incentivize to buy again.
4. Site engagement duration or times
Examples of this are dwell time or number of pages viewed. In some circumstances, it may be best to deliver personalization to visitors who have engaged with the site for a certain length of time. Audience behavior can also vary based on day or week or time of day, so audiences visiting at different times can be targeted differently
5. Content (products) viewed
This is the most common segmentation technique used in retail personalization based on product categories or individual products viewed. Related products of a similar style can be shown. Given the large number of products (SKUs) many retailers hold, some form of automation rather than a rules-based system is required here
6. Landing page
This is a slightly different form of content-based segmentation based on where the visitor first arrived on the site which suggests their initial intent.
7. Event or interaction
Common interactions on an e-commerce site are people who click on add to basket, checkout or interact with product information such as selectors for product variants such as color or size or reviews. Value in cart can also be referenced
8. Platform and device
As with analytics, a personalization system will usually be able to know browser, screen resolution, and device type (smartphone, tablet or larger screen formats). Again, rules-based systems can’t personalize against all these variables, but AI-based systems may learn useful personalization rules. E.g. visitors on Apple iOS or desktop platforms prefer higher-value products. Multi-device tracking is a requirement, including, where relevant, mobile apps.
Such as country, region or city, weather and season.
10. Third-party data sources
Using email addresses, names, and other identifiers, you may be able to enrich customer data about demographics using data from external resources
11. Favourites & Likes
Based on previous purchases segment your customers based on their likes and what their tagged favorites are. This can be done at brand, category and at product level
12. Average Order Value
If a customer’s purchases have exceeded a certain value, then you can cross sell in other products which may be of interest
13. Current basket profile
If a visitor has put products into their basket you can promote products that have similar product profiles whether that be color, material, theme, sizing. The profile attributes you can match are endless
14. Account type
This is more relevant for B2B customers
View the full guide “E-commerce personalization: The complete Buyer’s guide to selecting the best platform” to review examples of personalization used in e-commerce and gain access to a personalization recommendations checklist.