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Customer Retention. Automated

What Is Customer Segmentation Anyway?

Posted by Matt Williamson on Dec 7, 2015 10:28:00 AM

Customer Segmentation How ToIn the olden days of email marketing, you only had basic information about your customers, like email addresses. Maybe if you were lucky, people volunteered to give you more details like their first and last name or birthday, but even that data was unreliable. So when you created email marketing campaigns, you’d have to send the same email to the entire list and hope it was a generalized enough message that everyone would respond in some way.

But now, thankfully, with customer segmentation you can split your list into distinct groups, and target messages appropriately for each cluster.

Download the How-To Guide

Customer Segmentation is a two-step process: the first step is actually dividing the list and the second is targeting each group with a specific message.

If you have below 50% retained cusotmers - we call customers who have purchased from a retailer 3 or more times a retained customers - start by segmenting your customers into these four groups:

  1. One-time buyers
  2. Non-purchasers
  3. Churning customers
  4. All others

If you have over 50% retained customers, you should segment your customers into the following four groups:

 

  1. Best customers
  2. Non-purchasers
  3. Churning customers
  4. All others.

We choose these groups beacuse they will likely be your largetst segments, and the easiest to target. The reason we recommend that any retailers with less than 50% retained customers focus on one-time buyers instead of best customers is because their best customer segment, in most cases, is going to be too small to really drive the bottom line and improve engagement.

 

ONE-TIME PURCHASERS

One-time purchasers will make up the bulk of your customer database. In fact, in a recent study it was reported that 60% of retailers see less than 20% retention rates, meaning 4 out of every 5 customers will not make a second purchase. With this cohort it's important to start building a relationship and encouraging these brand new customers to come back and make their second purchase.

BEST CUSTOMERS

We usually start with the best customer segment by defining what a best customer actually is. For instance, our client SkinMedix defines their best customers as those who have purchased in the last 8 months and made more than 3 purchases. Any time you interact with a best customer, you should let them know that you recognize them and their loyalty to your brand.

NON-PURCHASERS

Non-purchasers are those people who receive your promotions but haven’t purchased yet, which means there’s a great opportunity here to get these subscribers into your sales pipeline. Turn your subscribers into customers using targeted messages letting them know you recognize they haven’t made a purchase yet and offer incentives to motivate a purchase.

CHURNING CUSTOMERS

With churning customers, who are people that haven’t purchased in a while but were once high value customers, the message is very easy. You want to tell this segment that you miss them and ask them to come back and purchase again.

ALL OTHERS

The all others group is just anyone who doesn’t fit into the aforementioned categories.

We’re here in Client Success to walk beside clients in their retention automation efforts. We answer questions, talk through the strategy and show clients how to set up campaigns, so that they can gain the knowledge to do it themselves. - Scot Caitlin

One customer segmentation best practice I’d suggest is to evaluate how your emails were performing both before and after segmentation. You can do this by measuring your last three pre-Windsor Circle emails for metrics like opens, clicks, conversions, and average order value. Then, do the same for the first three segmented emails, and compare the two data sets. You’ll likely see a lift on the segmented messages. Learn more about creating email benchmarks here.

How To Guide for Customer Segmentation

Customer segmentation adds value for your customers, and allows you to engage with them in a meaningful and relevant way, which leads to your ultimate goal of retention.

Download our Email Segmentation Guide for access to step-by-step instructions and more.

 

 

 

 

Topics: Customer Retention, Best Practices