Customer Segmentation Strategy

Every successful business needs to implement a customer segmentation strategy. Why? Because you need to know the value of your customers in order to create targeted marketing campaigns.

In order to create these, you will need to check out the RFM metrics. These data will help you understand exactly how your customers behave, and you will be able to split them into groups.

The RFM metrics will give you insights about customer’s buying recency, meaning when they placed the last order, frequency, or how often they buy from you, and monetary value, or how much they spend on every order.

This analysis works fairly simple. For every characteristic, each client will be assigner a number from 1 to 10. Usually, the customer with the highest score will be your ideal customer. 

For example, if your client scores 10 on the recency scale, it means he made a purchase in the last month, while 1 means he made a purchase in the last year.

Once you have all these data for the three categories, you can create the final RFM analysis to see which customers are more likely to buy again and when, and distribute them into buckets. This way, you will be able to prioritize your email campaigns and get the maximum results.

So, if your customers only placed one order in a couple of months, but they are still in your mailing list, you need to find an appropriate campaign for them.

Let’s give an example. 

Jim buys every month and spends an average of $300 per order. On the other side, Jen only buys once a year and spends an average of $100. 

Now, in order to correctly target them, you need to know how to send the promotional campaigns. Jen should get somewhere between 2 and 10 emails a year, in the $100 price range, while Jim should get 2 to 5 emails every month, in the $300 range.

Why Is Customer Segmentation Important?

It’s very easy. Your customers have a natural purchase cycle. If you send Jim the same emails you also send to Jen, you will lose that margin, and he will start buying less, which of course, is not what you want. 

If you send Jen the same emails Jim gets, she will consider that the offers are too expensive, and will most likely ignore the emails, or unsubscribe completely. 

You need to understand each customer group and find strategies that work on them. 

Of course, this can be a very hard mission, and you may need an expert’s help on this. Thankfully, this is what we do here. You can go ahead and drop us an email, and we will find and implement the best campaign, based on your numbers, for maximum efficiency.