Customer segmentation is one of the most important features for customer behavior in e-commerce. It enables personalized strategies for each customer group rather than applying all strategies in general which may be invalid. Segmentation helps to deal with different customers with different characteristics to strengthen their loyalty or to increase their purchase in the store, etc.
Big Data, Machine Learning, and Customer Segmentation
Big Data and machine learning extend the application of customer segmentation to e-commerce. Big Data helps us in processing, storing, and analyzing large amounts of data which is robust and easy to get the customer data such as characteristics, behavior, etc.
This is an important aspect to consider which confirms the accessibility and reliability of data.
Machine learning, a subset of Artificial Intelligence analyzes large data sets and segments the customers automatically. Machine learning models help in dynamic and multivariate segmentation of customers based on various attributes. The more advanced the segmentation methods the more benefits provided for the business decision making.
Common Types of Customer Segmentation
- Demographic Segmentation
- Geographic Segmentation
- Behavioral Segmentation
- Retention or Customer Journey-Based Segmentation
Demographic segmentation is one of the most common types of segmentation technique, demographic data are nothing but parameters such as age, gender, education, occupation, marital status based on these parameters customers can be segmented into different groups and can recommend personalized products to these customers which will improve the profit of the firm. For example, based on gender customers can be recommended with textile or other fashion products.
Geographic Segmentation involves grouping customers based on country, state, religion, climate, population. It helps to send personalized emails or messages by considering the local culture, weather, and holidays to improve the relationship with customers which encourages them to buy.
Behavioral segmentation involves segmenting customers based on the way they interact with your store. Segmenting customers based on their interests, segmentation based on customers who have added products to the cart but did not complete the checkout process, Segmentation based on purchases done on special occasions or holidays. Segmentation based on the purchase frequency or order value. These are some of the factors that are used for behavioral customer segmentation.
Retention or Customer Journey-Based Segmentation
Apart from the buyer’s needs and interests. It is necessary to know which stage the customer is in the buying process. This type of segmentation is known as retention or customer journey-based segmentation. This helps in segmenting the customer like visitors who have visited your online store but haven’t made a purchase, new customers, customers who have bought only once in the last 6 months or haven’t bought in the last 6 months, churn customers, etc. This Segmentation helps in targeting customers with the most relevant and useful information.
Customer segmentation in e-commerce is a strategic and more powerful feature. The above-mentioned customer segmentation types help to target and attract customers which indeed helps in improving the revenue of the store.