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Customer Segmentation and How Magento Has Made it Easier

Customer Segmentation and How Magento Has Made it Easier 1

Customer Segmentation and How Magento Has Made it Easier

Magento has recently released an eBook that covers and explains the importance of customer segmentation. This eBook can be applied to Magento Enterprise Edition because this edition is centered around attracting new customers as well as ways to keep customers loyal. It’s a great read and educational for any Magento Enterprise user – below are just some of the highlights from the eBook. Customer segmentation is an easy way to raise profitability and customer satisfaction for your company. So, what is customer segmentation and how do you become successful at it?

Customer segmentation is the idea of splitting customers into separate groups that share similar characteristics – it’s all about being able to cater to different groups and offer products that will fit their specific needs. Segmenting your customers strengthens your brand’s loyalty; because customers have become more decisive about what they want to buy, catering to each of these different groups is important. A “One-Size-Fits-All” marketing strategy is becoming a thing of the past – if you target the wrong customers with the wrong message, it will cost you money and time, but if you reach the right type of customers at the right time, it will increase conversions, average order values, profits, and overall customer satisfaction.

Customer segmentation might seem difficult to implement at first glance, but once you know your purpose, who you are targeting, and what methods of communication you want to use, then customer segmentation will become much easier. If you aren’t sure how start, a good place to begin is to look at the geographic, behavior, demographics, and lifestyle of your average customer. For instance, if you sell high end beauty products, you are likely targeting  women in high income areas. You could also target different stores who cater to your targeted audience.

To become successful at customer segmentation, you need to understand your business costs. How much do you spend on advertising and marketing? How much are your basic costs for operations? Once you know all of these numbers, you can figure out how much each customer costs you. You are basically looking at the customer’s lifetime value. To determine this information, you can look at it this way:

customer segmentation

Once you determine who your best customers are, you should be able to apply the 80/20 rule to your customer base. The 80/20 rule means that 80% of your sales come from 20% of your customers – the customers with the highest “Lifetime Customer Value” will tend to be your frequent shoppers with have high average orders, ask for fewer returns, provide solid reviews, and will be more likely to respond to promotions. As a business owner, you need to find the characteristics of both high quality and low quality customers.

As mentioned earlier, you’re much better off targeting the customer groups that will provide the most revenue – you don’t want to waste precious time and money on groups that won’t likely respond to your marketing efforts. The best way to understand your customers is by doing research. You can start off by looking at past transactions, but you need to go further than that. The Magento eBook authors suggests that you look at Census Data, different devices like phones and tablets, surveys and market research. The authors also mentioned that you can purchase packages, like Rapleaf and Sweet Tooth, that have web analytics and data services if you need help on getting started on the leg work.

Finally, make sure to build strong detailed customer profiles that can relate to different customers and can help strengthen brand credibility. Customer profiles help identify various kinds of new groups for existing products and change existing products to fit the needs of segments that are more distinct. You want to make sure that these segments are specific enough to categorize your customers, but not so specific that your customers may have to be in separate segments. Always look for ways to change and tailor segments and products to these constantly changing segments.

With Magento Enterprise Edition, customer segmentation and personalization for customers is an easy process. Magento Enterprise edition helps with:

  • organize inventory by product groups

  • categorize price by customer segment and product type

  • segment customers by demographic criteria

  • distinguish between new and repeat customers and by shopping cart and buying history

  • track items that customers have previously searched for

  • send reminders about abandoned carts and wish lists

  • offer gift cards

  • customize gift registry

You can also send promotions that target customer that you have segmented, recommend and up sell products, and promote reviews by rewarding customers when they retweet or share your brand on social media sites. Overall, Magento Enterprise is ideal for getting the most out of your marketing and segmenting efforts.

This is just a glance into the valuable information in Magento’s eBook over customer segmentation – I highly suggest that you download and read the rest of the eBook, as there are a lot of details that can help you better understand customer segmentation. If you are interested in downloading this eBook please refer to: http://www.magentocommerce.com/resources/introduction-to-customer-segmentation-ebook or if you are interested in switching to the Enterprise Edition or creating a Magento Enterprise Edition website, please don’t hesitate to contact us at (214) 810-5005 or email us at contact@creatuity.com. You can check out Magento’s other guides here, as well.