Segmenting customers into different groups is valuable but it's often easy to go a bit crazy.
I'm not talking Mad-Hatter silly-crazy.
More pull-out-your-hair-and-scream-crazy.
When it comes to customer segmentation you want to keep it understandable.
You can use a lot of algorithms or AI but at the end of the day it's about understanding the data and the results.
You need to understand how customers are segmented the way they are. You need to understand how those customer's behavior will likely be in the future. You need to understand how to reach them.
Algorithms can help you understand but they can't do the understanding part for you.
(At least not without turning over the running of your business)
The core of customer segmentation is about creating groups of similar customers. It could be simple segments with just two groups:
- customer vs not a customer
- one-time customer vs repeat customer
- local customer vs tourist
Shopify and ecommerce stores typically need more than that though. That's why stuff like customer grading and RFM come in to help. They give you more segmentation options, descriptions of the customer behavior, and let you understand more of what the data is trying to tell you.
Don't be afraid of customer segmentation. Every store does it even if they aren't thinking about it. Just be careful you get your segmentation paired with high-quality advice like from Repeat Customer Insights.
Otherwise it's just a computer's opinion.
Eric Davis
