How Analytics Help in Customer Segmentation
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Originally Posted On: https://bettermarketing.pub/how-analytics-help-in-customer-segmentation-7b7fff83a26a
Web analytics tools allow businesses to collect valuable information about their customers in real time. The number of online consumers worldwide is increasing at a significant rate.
The e-commerce industry’s share of the total retail sales is expected to increase from 20.7% in 2021 to 23.4% by 2023. It is expected to grow at an average annual rate of 1.3 percentage points each year. Digital-impacted retail sales are expected to grow even faster, and they are expected to account for over 58% of the total sales by 2023.
Source: CBRE Research, Q1 2022.
One of the most important factors that you should explore is the segmentation of your website audience to ensure that your particular offer is a best match to a particular audience segment. For instance, if you are planning on promoting a special offer in China, then it should only be visible to those who are in that country.
Segmentation is a process that allows you to identify the various groups of people who visit your website. It can help you understand the behavior of your audience and improve the efficiency of your website. After the first round of customer segmentation and analysis, it may turn out that only 3% of your 100,000/mo traffic convert into customers.
Unfortunately, when it comes to analyzing the data collected by web analytics, it can be hard to provide a clear explanation as to why some of your potential customers did not convert while the others did. With segmentation, you can create a separate segment for those who have already purchased products from your site. This method can help you identify the exact behavior, customer journey and purchase triggers of your most important audience.
Over the years, web analytics tools have evolved from a simple add-on software to a robust tool that can be used for various purposes. These tools can help you measure the effectiveness of your marketing and business operations. I’d like to overview the basic segmentation principles that can be implemented through any web analytics platform of your choice.
Using web analytics for segment creation
When it comes to analyzing big data, web analytics and segmentation tools are incredibly helpful. They can help you identify patterns, build hypothesis-making tools, and extract valuable insights from your data. Having the ability to pull in third-party data can also help you gain deeper understanding of your prospects’ behavior and demographics.
It may take a while to identify what metric or customer property should be taken as a segment basis. Usually web analytics build a few different segments based on different differentiation models until they discover the best performing / high-converting segment that should be taken for further marketing optimizations.
Hubspot shared a nice table of segmentation models for you to pick the most suitable for your business:
Before you start analyzing the data, it’s important that you identify the potential patterns that could help you identify your ideal customers. However, before you start building hypotheses, it’s important to remember that past performance can be misleading. For instance, if you’ve observed a lot of patterns that are stable without testing them against a control group, then you might make a mistake.
For example, if you discovered that the most profitable segment of your e-commerce site are people living in Los Angeles, be sure to check your special “LA” offer & landing page on a focus group before going all-in.
Geo-based segmentation of customers using Finteza web analytics. Source: Finteza
A controlled test is a step that involves testing the hypotheses against a group of people who aren’t part of the segmentation process. This method will allow you to identify if the proposed segments work.
Using segments in different web analytics platforms
- Google Analytics provides a variety of reports and features that allow you to analyze and visualize your audience’s behavior. With the new interface, you can easily create custom segments that are designed to meet your specific needs. These include demographic information, technology, the date of the first visit, and traffic sources.
- With the help of segments in Finteza, you can analyze the data collected to find out what types of customers are most likely to buy from you, as well as the factors that are contributing to their sales. You can also create reports that show how your marketing is performing, as well as identify areas where you can improve.
- Amplitude allows users to create dynamic audience segments by combining various data points, such as customer behaviors, product data, and profile data. These can then be used to build audience lists. For instance, you can segment audiences based on the last item they viewed, the average order value, and the number of videos completed.
Before you start catering to a specific customer segment, Gretchen Gavett, an editor at Harvard Business Review, recommends that you first evaluate the opportunity based on six criteria.
The characteristics of a specific customer segment are clear, and they can be easily measured by analyzing their purchasing behavior and reactions to marketing campaigns. You can also use various demographic and customer lifetime value data to identify the ideal customer segment.
One of the most important factors that you should consider when it comes to catering to a specific customer segment is the size of the group that you want to focus on. According to Bain & Company, a management consultancy firm, you should analyze the various factors that affect the profitability of each segment to determine the optimal strategy.
The customer segment should be accessible, and there should be a clear way to communicate with them at scale. For instance, splitting an email list into separate groups can be very easy, but it can be hard to share targeted posts on Facebook without using the company’s advertising tools.
The customer segment should also be stable. Dynamic marketing techniques can negatively affect the performance of your campaigns. Having a distinct and unique definition of a customer segment is additionally important to ensure that your marketing efforts are successful. Each of your customer segments has its own unique communication needs and wants. You can also create a group that shares the same needs and preferences.
Lastly, the segment should also be actionable, as it should be able to design and implement effective promotional campaigns that can motivate its members to take action.