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How to use Magento customer segmentation for smart online store management
A powerful marketing and sales tool, Magento customer segmentation allows a retail company to divide online store visitors into groups and develop a focused approach to each group. The survey of MailChimp, a marketing automation platform and an email marketing service, shows that segmented marketing campaigns get 14.64% more opens and 59.99% more clicks than non-segmented ones. As a Magento consulting company, we also see the rationale for segmenting customers in ecommerce.
A basis for customer segmentation
All possible grounds for customer segmentation form three large groups:
- Demographic factors (location, age, gender, marital status, etc.)
- Psychographic factors (lifestyle, religion, interests, etc.)
- Behavioristic factors (shopping behavior)
1. Customer segmentation based on demographics can be quite useful for online store management. For example, a high percentage of foreign visitors on a website hints that it requires language options. Still, this approach has some limitations. Customers within one demographic segment can develop fundamentally different shopping behavior. For example, people of the same age or gender may diverge significantly in time spent in an online store or in average amount of purchases.
2. Psychographic segmentation is more powerful. For example, you may divide customers based on their attitude to the environment. Focusing on environmental concerns of your green customers, you will win their respect and loyalty, while not annoying the “unconcerned” customer segment with too many promotions irrelevant to their mindset.
3. Shopping behavior analysis allows for different approaches to customer segmentation. It depends on the behavior aspects you want to analyze:
- Occasion (e.g., seasonal behavioral patterns)
- Benefits sought
- Status in a customer lifecycle
- Buyer readiness stage
- Level of loyalty to the brand
- Product usage rate and more
Customer lifecycle segmentation as one of possible behavior-based approaches
Here, we will focus on the approach based on customer lifecycle because it’s both valuable and easy to implement. The approach is shared by many ecommerce analysts, though segment names can slightly differ. The approach offers to divide customers into seven groups (segments) based on their user status corresponding to a status in customer lifecycle. Then, owners of Magento online stores can tailor a marketing campaign to meet the needs of each segment.
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Customer segment |
Segment scope |
Customer promotion strategies that can be implemented in Magento |
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1 |
All visitors |
Literally everybody who has visited your website. |
You should start with the full visitor list, storing all the emails in one place (consider a CRM solution). Possible promotions:
The aim is to arise interest and encourage to visit the store. |
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2 |
Potential customers |
Customers who have created a shopping account, signed for an email newsletter, or saved some item for later. Potential customers haven’t made a purchase yet, and you don’t know the reason – it can be a high current price or an intention to study the whole assortment first. |
Add:
The aim is to encourage potential customers to purchase for the first time. |
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3 |
First-time buyers |
Customers who made the only purchase on the website. They might have been unsatisfied with the order, but there can be other reasons, including high current prices or low awareness of the full assortment. |
Add:
The aim is to convert a first-time buyer into a loyal one. |
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4 |
Repeat customers |
Customers who made two or more orders on the website. This means they were satisfied with the first purchase and returned to your store. |
Add:
The aim is to keep a customer satisfied and encourage to refer friends to your store. |
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5 |
Active repeat customers |
Customers who make repeat purchases within a set timeframe. These are the most valuable customers. They stay loyal to your store and generate the largest revenue. |
There are two ways to implement a customer promotion campaign: 1) Make these customers feel important:
2) Reward their loyalty:
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6 |
At-risk repeat customers |
Active repeat customers who haven’t purchased for quite a long (you can define the time frame individually). |
The primary aim of loyalty recover can be achieved with:
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7 |
Inactive repeat customers |
If the time since the last purchase exceeds the average time between orders more than 3-5 times (again, the time frame is defined individually), at-risk repeat customers turn into inactive ones. |
The aim is: 1) To find out the reason why customers stopped buying with you:
2) To encourage them to return:
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Implementing lifecycle customer segmentation in Magento
If you have decided to enhance your online store’s efficiency with targeted marketing campaigns based on the status in customer lifecycle, you need to take the following steps:
- Create customer segments in Customers – Segments section;
- Add relevant conditions for each segment (in this case, you will add number of orders and date range);
- Once the conditions are set, you will see the amount of matched customers;
- Add promotional rules for each segment.
Customers within each segment will start getting automated notifications of promotions according to the rule.
Enterprise customer segmentation may seem complicated only at first glance. Analyzing a customer base and planning segments is the most important part of the work while the implementation itself will hardly be time-consuming.
An efficient marketing campaign based on Magento visitor segmentation implies regular updates. Don’t forget that you have access to valuable information about customer behavior. Use this information to analyze which promotions have worked out for each segment to adapt marketing activities to changing needs.
Smart approach to Magento customer segmentation
As there’s no one-size-fits-all approach to store management in general, the same applies to customer segmentation in particular. You need to analyze your customer base to make the most of your Magento online store. A clear understanding of the needs of each segment allows for customized approach and the development of rewarding marketing and sales policies.