Drilling Down to Three Profitable Segments for Ecommerce

Drilling Down To Three Profitable Segments For Ecommerce

Written by Rob Lane.

1. Overview

Since ancient days, when all roads of trade led to Rome, successful merchants have been those who have learned how to effectively segment their markets, and target their most profitable groups. In our brave new world of ecommerce, the capacity to segment based on orientations such as: geo-location or lifestyle; on demographic traits such as age or gender; and on hosts of other distinct divisions, is advancing steadily.

All of these different groups represent various degrees of potential profit, so the best place to start is on those segments, which embody the most profit – let’s call them VIPs (Very Important Profitable Segments). These are the individuals who love what you sell to the point that they will make you rich… if you continue to make them happy, or even just drop by for lemonade once in a while.

Take the recent example of Walmart, over the Black Friday weekend, which showed us how to really pitch attractive deals to profitable and trending segments such as millennials and other working Americans, by timing some of its best deals with its ‘Cyber Monday Evening Edition.’ When it was all over, Walmart reported that:

Cyber Monday 2014 was Walmart.com’s biggest day in its history for online orders

At rare.io we are ecstatic about being able to simplify the digital segmentation process, formerly in the domain of companies like Walmart and Amazon, so that virtually anyone manning an online store can easily pay attention to and pitch to their most profitable segments. Our technology is fueled by the rich abundance of transactional data now generated from popular ecommerce platforms like shopify, spree commerce and Bigcommerce.

So where do we start the segmentation process for ecommerce retailers? Start where there’s money to be made. The most profitable segments may vary between industries, but some common pillars of revenue generation are emerging:

2. Profit Segment #1: Churning Customers

Oftentimes, it is far more profitable to win back customers who have churned (bought from you and then walked away), than it is to try to gain new customers at significantly higher costs, “According to Bain and Co., a 5% increase in customer retention can increase a company’s profitability by 75% [in some cases 95%].”
Our graphical interface, easily allows you to see, at a glance, which customers are churning and to break this group down further into segments based on customer lifetime value (CLV). After all, customers are going to walk away for different reasons, requiring different levels of incentive to revisit, repurchase and continue on in the relationship with your store.

Target VIPs Who Are Churning

In our application, you can easily identify, say the top 20% of customers who are churning, in terms of their CLV. You can then quickly see where concentrating your marketing efforts will net the greatest return for your dollar. From there, it’s easy to create an email message, tailored specifically to churning VIPs, where your enticements might be more generous, more creative or more engaging, all in an effort to welcome these highly valuable customers back into your store.

3. Profit Segment #2: Repeat Customers Vs. One-Timers

In the hyper-competitive world of ecommerce retail, many customers flit from store to store, not choosing to land back in the same online space unless they are really impressed, or are incented with a good reason to do so. With rare.io, you can run a filter on one-time vs. repeat customers so you can easily see the exact portion of customers, who’ve only bought once, which is typically about 80%. It’s like being able to see the part of the iceberg that’s below the surface and which might not otherwise get much attention.

When Do You Follow-up With A First-Timer?

From the data we collect, you can also see patterns emerging as to when first-time buyers are most receptive to receiving a follow-up message from you, usually along the general lines of 1, 3, 7 or 14 days from first purchase. With the segment of one-time buyers identified, and the best intervals to pitch them determined, your mail-out can be crafted and inserted into one of our email templates, so you can reach and engage the one-timers when it makes the most sense.

4. Profit Segment #3: Follow The Product

Another tremendous benefit of ecommerce data over that collected by traditional bricks-and-mortar stores, is that we know exactly who purchased what and when. When this data is combined with innovate marketing strategies that are product-centric, sales can surge.

A great example of this strategy in action comes from one of our valued customers, Kaufmann Mercantile, whose owner Sebastian Kaufmann says:

“Rare bridges the gap between information and action…. It’s very intuitive and allows you to go from highly visual graphs to a specific segment, and then immediately take action with just a click.”

KM looked at customers for its EDC (every day carry) kit, which is a small collection of tools and accessories aimed at the modern man and his quest for urban survival, and pitched these customers with an effective follow-up message. By offering the most sought after add-on tools at the right time and to the right customers… KM was able to generate significant additional revenue. They were also further acquainting new customers with their unique brand and shopping experience with every repeat purchase… and so an effective customer relationship grows.
Segmenting your market by profit-ability will ensure that your email marketing and digital retention strategies will net some level of return. The challenge is finding the most profitable segments for your business as quickly and easily as possible. This is where rare.io can help.

5. Conclusion

Rare.io makes it easy to start using automated email campaigns for common challenges like: Welcome Series, Abandoned Carts, Order Follow-up emails and more! You can learn more about our powerful email marketing automation features here or go ahead and get started right away by using Rare.io for FREE.

Try Rare.io FREE!

And if you’re one of the thousands of merchants who are already using Rare’s Smart Email Marketing software and want to see how our Customer Success Team can work with your brand to grow your revenue – feel free to book a call at your convenience here.