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It is commonly known that a Jack of all trades is a master of none, so why do you think your eCommerce business is any different?
Customer segmentation is not a new concept, but surprisingly to this day, many businesses don’t use it. And some others use it without understanding its significance and how it can help reshape the whole way they conduct business.
So if you are among those who don’t fully comprehend the importance and benefits of customer segmentation, this article is for you!
Keep reading to learn why customer segmentation is important for eCommerce businesses.
Table of Contents:
- What is Customer Segmentation?
- Top 11 Benefits of Customer Segmentation
- Know The Customer
- Increase Conversion
- Improve Customer Retention
- Build A Loyal Customer Base
- Enhance Competitiveness
- Product Development
- Price Optimization
- Identify New Markets
- Reduce Long Term Costs
- Improve Inventory Management
- Better-targeted Messages
- Improve Customer Service
- Better Customer Satisfaction
- Get a High Return On Investment
- Skyrocket Sales and Revenues
What is Customer Segmentation?
Customer segmentation, or audience segmentation, is the process of categorizing your client base into groups with similar characteristics. Through this process, businesses can easily tailor their marketing messages or even products to fit each individual segment.
There are several types of customer segments you can use, such as
- Demographic segmentation
- Psychographic segmentation
- Behavioral segmentation
- Transactional segmentation
- Technographic segmentation
- Needs-based segmentation
- Geographic segmentation
- Seasonal segmentation
On that note, let’s take a deep dive into the benefits of customer segmentation.
Discover more in A detailed guide on customer segmentation in retail e-commerce business.
Top 11 Benefits of Customer Segmentation
What are the benefits of customer segmentation? This may seem like a complicated topic and we won’t lie; the whole process is no piece of cake. But by having deep learning of the advantages of customer segmentation and utilizing this knowledge, your business will reach its full potential.
The list of benefits of customer segmentation to eCommerce businesses and benefits of segmentation to customers can go on for pages and pages. To keep it simple, here are the top 11 benefits to keep in mind;
1- Know The Customer
The first rule of any successful business is knowing who your customers are. And surprisingly, segmenting your customers can be a great way to get to know your client base.
How? Simply, to start segmenting, you need to conduct a thorough research about your existing customers. This will help you learn who your brand and products resonate with.
Accordingly, all your teams (like marketing, PR, and R&D) can alter their efforts based on each customer segment’s attributes.
2- Increase Conversion
One of the most important and obvious benefits of customer segmentation is increasing conversion.
It’s a no-brainer that when you are targeting the right people, at the right time, in the right place, your conversion will drastically increase. Needless to say, that’s exactly what you will achieve with the right segmenting strategy.
3- Improve Customer Retention
Did you know that retaining a customer is 5x cheaper than acquiring a new one?
Segmentation is not merely used to attract new customers. But it can also be used as a way to nurture your existing customers and ensure they stay loyal to your eCommerce business.
4- Build A Loyal Customer Base
Speaking of loyalty, it’s easy to see why consumers love a brand that knows them well.
Just imagine for yourself, you get two emails in the morning one with a generic message and some standard product. Whereas the other has a personalized greeting and the products you need just at this moment.
Who would you buy from?
By successfully segmenting your customer base and acting accordingly, you will always be relevant to them. And that’s how you get customers that will be there through thick and thin!
5- Enhance Competitiveness
Think you can’t compete with industry tycoons like Amazon? Then surely you don’t segment!
The big retailers allocate quite a budget to offer a unique shopping experience. So for you to match that, you need to offer a more tailored experience (Of course, that comes hand-in-hand with audience segmentation).
By that, you will be connecting more with your customers and delivering comparable experiences to those provided by the biggest names in the market.
6- Product Development
As previously noted, your R&D team can benefit greatly from customer segmentation. In fact, this point can be described as a win-win situation.
In other words, this is one of the benefits of segmentation to customers and your eCommerce business.
That’s because when you have a deep knowledge of your customers, your development team can recognize the pain points customers have with the products. Then they can successfully turn them into features.
It’s not only about reconstructing your products, but customer segmentation can also ignite the creativity spark of your team and help them create brand-new products.
7- Price Optimization
Image source: creativelive.com
Some customers think your products are too expensive. Others think they are not expensive enough.
That’s what you will get to know when you start segmenting your clientele.
With this important information, you can reshape your pricing strategy or offer various products to fit different budgets.
Over the past few years, with the rise of the global economic crisis, many eCommerce businesses also decided to introduce payment plans. So they can reach more of their segments.
8- Identify New Markets
Despite being one of the top benefits of audience segmentation, many eCommerce businesses don’t know how to identify new markets through segmenting.
When you segment your customers, you get a better understanding of what consumers want and expect.
As a result, it will be a lot easier to identify gaps in the market and recognize brand-new untapped markets.
If we take the same example from before and consider potential customers that think your products are great but out of their budget. Then you can introduce a more budget-friendly option and reach a whole new market.
9- Reduce Long Term Costs
Among the long list of reasons why customer segmentation is important for eCommerce, you will find that it helps you in
- Improving NPS score
- Efficiently using marketing and product development budgets
- Learning when to pursue or give up on potential customers
- Differentiating your online store
What does that all do?
Easy, reduce long-term costs and effort!
When you stand out from the crowd, customers are satisfied and you are spending money where there is a return, you will get to cut many unnecessary costs and focus your efforts on what’s truly important.
10- Improve Inventory Management
One of the major advantages of customer segmentation is knowing what triggers your customers to make a purchase. Maybe you have some holiday shoppers or maybe you have a segment that likes a certain product at a specific time.
On that note, it’s easy to see why improving inventory management is one of the customer segmentation benefits.
Because when you know when certain products are needed you can stock up!
11- Better-targeted Messages
With the help of customer segmentation, you can easily understand who your audience actually is, thus marketing your brand to the right people. Without it, marketing your brand is similar to throwing a wide net in the sea and waiting for which fish gets caught.
12- Improve Customer Service
When you get feedback from your customers from different segments, you will be able to comprehend your audience better and how your customer grouping helps your business. Doing so will help you create improved solutions for your customer's queries, thus providing them with better customer service than before.
13- Better Customer Satisfaction
By segmenting your customers according to their buying habits and other traits, you can send personalized emails showing their areas of interest. This will make your customers feel unique and valued, thinking that they will always get some deal whenever they make a purchase from your brand.
14- Get a High Return On Investment
Retaining already-existing customers is far more convenient than acquiring new ones. Therefore, focusing on customer segmentation as a marketing tool would increase the lifetime value of your loyal customers. Sending them personalized marketing campaigns according to their segments will help retain your customers, thus generating a more significant ROI. They will repeat their purchases every now and then from your brand.
15- Skyrocket Sales and Revenues
Like anything you do for your eCommerce business, the main goal is increasing sales and revenues.
And when you bear in mind all the previous points, you will get to see why customer segmentation can effortlessly help you skyrocket your orders.
In simple words, by learning how to speak each customer segment’s language and meet them where they are, you will be out of stock in no time!
What’s Next?
Now that you have learned all about the top benefits of customer segmentation, it’s time for you to take that leap forward.
Converted.in can help you with that! Through our marketing operating system, you can auto-segment your customers, tailor personalized messages, and a lot more.
Book a demo now with one of our professionals and take advantage of the benefits of customer segmentation.
