As Winter Wonderland season approaches, think of your customers like ice crystals – each one (somewhat) unique. Hopefully holiday metaphors aren’t required to remind you that customer segmentation and targeted marketing are important all year round! Strong and carefully considered customer segmentation can help eCommerce brands achieve the holy grail of retention marketing: getting the right message and right promotion to the right customer at the right time.
But let’s talk holiday. A strong customer segmentation strategy is particularly vital now, in the months leading up to and during the holiday season. Q4 2021 is stacking up to be more competitive (and profitable) than last year. Make sure to take advantage. The ability to segment your customers for your holiday marketing efforts is a gift you shouldn’t pass up.
If you’re just beginning to implement a customer segmentation strategy, don’t worry; you don’t have to make things too complicated this holiday season to see results. Following are some tips and practices that can be easy to implement (especially if you use Daasity’s platform) and can help your business have a fabulous sales season.
Why customer segmentation?
Take a minute and think about your own experiences with brands that market to you. The ones who “know you” – your preferences, needs, interests – and make it easy to buy – free shipping, offers at the “right” time via your channel of preference – are the ones you most likely gravitate to and purchase from.
Segmentation is the “magic” that makes this possible: grouping similar customers together based on similar characteristics, attitudes, intent, or behaviors so that you can market to them more effectively. And it can work really, really well. Research shows that customer segmentation boosts conversions; for example, an eMarketer report showed that nearly 40% of marketers who segmented their email lists saw higher open rates and 24% saw higher revenue. The same holds true with digital and social media marketing: Google says mobile campaigns that use intent-based targeting have 20% higher ad recall with consumers and 50% higher brand awareness (over using demographic targeting alone).
Developing a holiday segmentation strategy and plan
So many ways to segment, so little time (and budget)… how do you decide on the most effective holiday segmentation strategy for your business? How is customer segmentation during the holidays any different from the rest of the year? The principles behind segmentation remain the same. The difference is which customers you’ll target to achieve your specific holiday business goals. For example, to hit your holiday revenue targets, will you incent your most valuable customers to spend more than last year? Increase subscriptions? Grow your customer list? (The holidays can be a prime time to do this: a Deloitte survey found that 65% of consumers said they were open to shopping at new retail stores or websites last holiday season.)
Note: once you determine your holiday segmentation strategy, it’s also important to decide how you’ll measure your success. These KPIs could include revenue (performance vs. plan), gross margin, new customer acquisition rate, customer acquisition cost, and other metrics.
Next: your holiday marketing plan. When planning to carry out your segmentation strategy, think holistically. In other words, be sure to plan your marketing campaigns and offers with an understanding of what inventory you’ll have on hand and which products you’ll need to promote. It can be a dance – you don’t want to run out of a well-selling product on December 1. You also don’t want to be stuck with a lot of excess inventory in January because you didn’t promote it enough. Lastly, remember that deep holiday discounts and unexpected costs can decrease your profitability – so be prepared and flexible to change up your promotions as it makes sense for your bottom line and inventory levels.
Also, remember that different customers may prefer different communications channels. Therefore, consider various channels and combinations of channels to market to your different customer segments. For example, look at your data to determine if certain social platforms are better at new customer acquisition versus for returning customers. If you’re a young brand and don’t have much historical data, it’s smart to test different channels and content to get some sense of what works before the holiday season really ramps up.
If you do nothing else, try these 4 strategies for holiday segmentation
If you haven’t done much customer segmentation before, keep it simple. We recommend at the very least that you use data to identify and pick some low-hanging fruit. All these segments should be easy to build in your Email, SMS and paid media channels
- Target customers who purchased last Q4
Customers who bought last year and haven’t purchased since are a great segment to focus on this holiday season. Don’t write off Holiday shoppers. Some people will only buy from your during this time of year. Create a segment of the customers who have purchased last holiday season and the previous year to send promitions to this year. Spend some time developing compelling content and offers specifically for them this year – on social media, email, SMS, and more.
- Target High Value Customers
Provide your best customers with an extra present this holiday season. Create special offers, incentives or products to reward your best customers for always being their for you. We’ve seen brands launch exclusive access to their Holiday promotions be an effective tactic.
- Target Churning high-value customers
These could be customers who’ve spent a lot in the past but haven’t purchased in a while. Catch them before they churn with a holiday promotion that will pull them back in to buy now. It’s a great way to offer them a great offer/promo without appearing like you heavily discount normally.
- Increase subscriptions
If you have a subscription program, target non-subscription customers who might be most likely to sign up (e.g., have purchased products in the past that are available as a subscription). Or you could encourage current subscribers to purchase a subscription as a gift or refer-a-friend.
- Leverage Daasity out-of-the-box segments
If you use Daasity, take advantage of our out-of-the-box segmentation tools. We provide a pre-built list of the most common and effective segments to include in your Marketing strategy” Use these to easily create customer segments to generate customer lists which you can then stream directly into your marketing platforms. Common customer segmentations we offer include:
- Your “best” or high-value customers: Based on purchase recency, frequency, and monetary value
- Customer status: Active or lapsed
- Behavior: Single versus Multi-purchasers
- RFM Scores: Customers purchase behavior (recency, frequency and monetary)
These segments are good starting points for developing your holiday customer lists. However, every business is different. To determine which segments are most effective for you, ultimately you have to test and analyze the data. To do this:
- Create a hypothesis: “I think high-value-about-to-churn customers are more likely to respond to a discount in an email”
- Segment: Identify your high-value-about-to-churn customers
- Test: Split your list into two groups and A/B test discount vs. no discount
- Collect & analyze data: Compare metrics like response rates, orders, gross margin, etc.
Wrap up your best year with holiday segmentation
2021 is on track be another record-setting year for eCommerce sales. Having a customer segmentation strategy – even if it’s a relatively simple one – is an important factor in achieving your best holiday season of all time. Daasity helps make customer segmentation a no-brainer. We’re happy to help walk you through your questions and help you navigate our pre-built segmentation tools that directly streams the data into your Marketing channels making it easier to target your best segments. Contact us.