The direct-to-consumer space has rapidly grown past its early stages. From archetypal brands like Warby Parker and Casper offering people a way to buy common items on the internet to hyper-specific brands like plant-protein energy drink VUUM—there are so many ecommerce brands (over 26 million in fact, according to Doofinder).
So, how do you profitably compete in a world with so many options? How do you ensure that your marketing dollars are going to the right people, at the right time, with the right offer? The answer: Customer segmentation.
In this article, we’re going to cover what customer segmentation and ecommerce analytics are, why they matter for your bottom line, and how you can leverage them to increase your sales, profits, and customer satisfaction.
Understanding Customer Segmentation in Ecommerce
When you’re first getting started as a brand, your primary goal is simply to find your first customers. This may look like targeting groups that use your product on a daily basis—such as run clubs for an electrolyte drink or recipe blogs for a cookware brand—or by going where your highest quality customers are who are willing to spend a lot of money on your goods.
It’s initially about finding product-market fit and validating your idea, not about optimizing every last penny. But as you grow, this starts to change, and this is where customer segmentation comes in.
Customer segmentation is the process of separating your customers into groups based on shared characteristics. While there’s no “one right way” to do this, here are a few common traits to think about:
- Demographic: Based on things like age, gender, and marital status (just FYI, 18 to 24 year old adults make up the largest share of shoppers according to Hubspot). Example: Sally, a single mom aged 43 with two kids.
- Psychographic: What the customer is interested in, values, and keeps in mind when shopping. Example: Eric prioritizes sustainability, so his favorite brands are made of recycled materials.
- Geographic: Where the customer lives, what the weather is like, and what needs they have as it relates to their environment. Example: Tim, who lives in Seattle where it rains 150 days a year.
- Behavioral: The customer’s shopping habits and where they are in the customer journey. Example: Jennifer has purchased from you three times in the past year, but Bob has been on the newsletter for over a year without buying anything.
Separating your customers into groups based on characteristics like these helps simplify how you’re thinking about them. Rather than looking at everyone who has, or who you want to have, purchased your product just as a generic entity (“has bought something from us before”), customer segmentation helps you to create personas for buyers that allow you to refine your growth strategy.
How to Boost Conversion Rates and Engage Target Customers
Picture this: You’re an online natural meats brand known for your grass-fed ground beef and seasoned jerky. Your customers love meat and while you don’t know for certain, you probably assume that no one who follows a vegan diet is buying from you. Regardless, you’ve taken the initiative to launch a plant-based beef patty option, just in case there are customers you’re missing out on.
When the new product page goes live on the site, you get zero sales.
This is an extreme example of course, but it gets to the core of the issue: You can’t acquire customers by offering them something they don’t need or want. Customer segmentation lets you narrow down who you’re trying to sell to, what they care about, and how you should speak to them—which will reduce friction in the conversion funnel and lower your acquisition costs.
Here are three steps you can take to increase revenue and find your ideal shoppers:
Define Your Segments
Before you can extract the full value of your marketing efforts, you need to define your terms. In this case, your types of customers. Again, there’s no exact formula for creating a customer segment and they can vary brand by brand.
You’ve probably already done some sort of customer segmentation when defining your target market—lean into this and expand upon what you’ve already determined is right for your product and brand.
Study, Study, Study
Now that you’ve grouped your customers, use the data from analytics apps like Shopify Analytics, Google Analytics, and post-purchase surveys to further understand them. You’ll gain insights on things like what channel they came from, how many purchases they’ve made, how they use your product, and more.
We’ll discuss using analytics a bit deeper below, but the important thing to note is that you need to know as much about each customer segment as you can and analytics are a way to help.
Speak to Your Segments’ Different Needs
This is the fun part. Now you get to use the information you’ve gained by creating your customer segment and understanding what they care about. This affects everything. The creative, copy, and traffic channel you use for one segment could be entirely different from another.
For example, HexClad may use more celebrity endorsements and lively videos while targeting younger audiences shopping for their first pots and pans on Instagram, while it uses more feature-based content on Facebook when going after older demographics who have purchased plenty of cookware before.
Pricing, discounts, and your offer will also depend on your customer segments. Younger segments with less disposable income will be more likely to convert on products with a discount, while high-income households in major cities prioritize quality and benefits over price. The more attuned you are to each segments’ desires, the more easily you can get them to pull out their credit card (or use Apple Pay, which is the most-used mobile payment solution according to Statista).
Ecommerce Analytics for Better Decision Making
While some things can’t be realized through data alone (like who would be in a psychographic customer segment), most things can be clarified by taking an analytical approach. And thankfully, if you’re reading this you probably sell things online, where data is abundant.
Ecommerce analytics are the data points gathered from every part of your customer journey and site. While they can be predictive, ecommerce analytics really just tell the story of what customers are doing when they interact with your brand.
The more data you have, the more accurately you can guess what each customer will do. They simply help you operate your business better. Here are just a few common types of customer analytics you can track with Shopify reporting:
- First-Time vs. Returning Customers: How many shoppers are placing their first order or are repeat buyers.
- Amount Spent Per Customer: How much each customer is buying in dollars.
- Top Products: What your best selling SKUs are among each cohort.
Customer segmentation and ecommerce analytics go together like peanut butter and jelly: The better you can characterize your customers, the better you can measure them and respond accordingly.
Shopify Analytics for an Effective Customer Segmentation Strategy
Because this data loads directly into your Shopify dashboard from your site, your Shopify store analytics are some of the most reliable pieces of information you’ll get. They let you better understand revenue fluctuations, traffic sources, customer profiles, and more.
Back to our online meat brand example, if that seller had a better idea of what each type of customer purchased that was backed by real data, its next product would be a homerun, not the plant-based hamburger patty.
Based on its customers’ order history, they could introduce a new bacon jerky to John, who orders a few packs of the classic beef jerky every month. John’s thrilled with the new product and the brand’s AOV and LTV instantly go up. Take it from the ecommerce king—according to Bornflight, 35% of Amazon’s sales come from product recommendations. How much could you increase your revenue by offering customers exactly what they want?
Here are a few steps you can take to implement the insights from your Shopify reports into your customer segmentation process:
Leverage Shopify Analytics to Create Customer Segments
While it’s smart to look at things like location and interests when creating your customer segments, empirical characteristics like spending patterns can also be used when determining your customer buckets.
You can create separate cohorts like overall top spenders, top spenders by geographic location, and more. If your goal is to drive more sales, then why not focus more on the people who are already spending a lot with your brand?
Predict What’s Next
Analytics for Shopify is powerful. The longer you feed it data, the more accurate that data will be and the better it can forecast what’s coming over the next days, weeks, and month. If you know that one month in particular is a slower sales month, then that’s when you should consider launching a new product that you know your Top Spender segment will absolutely love.
Additionally, Shopify has several customer cohort analysis tools including a predicted spend tier report for customers who have made a purchase and it groups them into High, Medium, and Low. Reports like these help you get ahead of the curve—rather than just guessing how a customer will act once they’ve given you their money, you can have a true estimate.
Closing Thoughts: Create Segment-Specific Landing Pages With Replo
As you get a better idea of your revenue throughout the year and how each type of customer is going to interact with you, you can narrow your focus even more. As mentioned, your ad creative and copy will change based on each customer segment, but what about your Shopify pages?
Landing pages act as a bridge between your ad and your offer—and they’re the best way to convert cold traffic (i.e. acquire net-new customers). Depending on the messaging in your ad, your landing page will be affected. This also means that you can create landing pages that are specific to each of your customer segments.
A segment that is more solutions-focused and analytic when making their buying decisions would likely respond to a listicle landing page that explains all of your product’s benefits, while a segment that’s more mission driven may convert better on an advertorial landing page that tells a passionate, engaging story about how your product helped in their daily life.
With Replo landing page builder, you can quickly create pages with our no-code editor and A/B test them using the information you get from your Shopify analytics dashboard. Because speed is the name of the game, especially in ecommerce, it’s important to consistently be checking the data you receive from Shopify Analytics (such as add to cart events, etc.) and incorporate that back into your pages, resolving sticking points on the user journey, speaking to pain points, and doubling down on what’s working.
If you’re just getting started with landing pages, check out our hundreds of landing page templates that were inspired by top brands and high converting pages. We integrate directly with Shopify, so you’ll be able to truly understand everything that’s happening via Shopify Analytics.
Replo Shopify page builder comes with a community of Experts available for hire and 24/7 support to help you get the most out of Replo. Check out our blog for more information and resources on all things marketing and ecommerce or reach out to schedule a demo with us. Also join our Slack community and follow us on X to stay updated!