[E-commerce Operation Strategy] Part 3: The new road; Customer Segmentation is making an impacts

 

Part 3: The new road; Customer Segmentation is making an impacts 

 

By Jake Park(jake.kbpark@gmail.com) / e-Commerce consultant / IT Project Manager

 

During the pandemic, companies focus value on analyzing customer information and customizing their preferred products and services in their operational e-commerce strategies. Most importantly, the company's CRM system is changing to meet its needs. It means that expectations for the customer experience are higher than ever.

What are the fundamental components for an enterprise to optimize its customer experience? To this end, customer segmentation is essential to understand exactly how consumers and products relate to each other, their specific needs, and how they work with the company brand. Customer segmentation is a prerequisite for companies doing e-commerce business.

 

Why Companies Focus on Customer Segmentation

Why do e-commerce companies put much effort into marketing through customer segmentation?

The first reason is that the share of online e-commerce increased significantly during the pandemic. Accordingly, the needs of consumers have diversified and expanded.

Second, there is a limit to offer various benefits (coupons, points, mileages, etc.) through traditional marketing with a limited budget of a company. Although companies focus all their capabilities on online e-commerce, not offline, there is a trend that we should apply online-offline (O2O) services. Also, we should give differentiated benefits to existing or potential customers.

Finally, differentiation of marketing can give customer value like loyalty. Value-based customer management is essential through customer segmentation to gain a competitive advantage over competitors in the same industry.

 

Marketing imperatives; customer segmentation

The best way to divide the customer is first to identify the characteristics of the customer's behavior and select the customer's attributes to segment them.

The customer segmentation consulting approach depends on the industry and customer needs.

 

Customer Segmentation Consulting analyze:

1. Demographic and socioeconomic factors.

2. Behavior, attitude, and psychological factors

3. Analytical verification of corporate vision, etc.

 

Firstly, we analyzed existing CRM data within the company to know these factors' correlations. For analyzing data, consultants use ‘RFM (Recency, Frequency, and Monetary) analysis’ techniques which check recent consumer activities, frequency of consumer behavior, and expenditure from various perspectives. Also, they can utilize 'Regression Analysis' to learn about the effectiveness of customer membership. It helps to do inbound marketing, which impacts specific variables (such as price, age, region, membership point, etc.).

 

Segmentation case to find consumer behavior patterns

Company B(Gas&Oil), which requested consulting, has already conducted customer-centered marketing for a long time because of the importance of customer marketing. This case strategically tried to change the e-commerce business in line with the global mobility trend.

First, for advanced marketing, the existing customer group (layer 3) was subdivided into 10~15 customer layers from perspectives using CRM data.

Second, the consultant used a redefined customer segmentation methodology to identify the underlying factors that drive purchases based on individual propensity and derive the behavior consumers want. Accordingly, there is no need to conduct marketing linked only to loyal customer groups for one-dimensional marketing purposes. As such, the marketing team can benefit various customer groups, and it is possible to respond to different or intended situations.

 

Step 1) Select Customer Analysis Items

According to the customer's lifestyle and customer behavior, we selected various analysis items to analyze the data

• geopolitical differences
• Customer's life cycle: leisure and travel, commuting, sales, pickup, shopping, hobbies and culture, public transportation (taxi), cargo
• Customer's Payment Method: Cash, Card, Mobile Pay
• Payment time zone
• Customer's payment interval, etc

Step 2) Action-based customer segmentation

After combining the customer's behavior based on each analysis item selected above, the customer is reclassified by grasping the characteristics of each combination.

The results of the data analysis were used to recombine the segmentation to determine whether it fits the customer's requirements.

Step 3) Marketing suggestions based on individual marketing results

Finally, we utilize various tools for timely marketing offers based on each customer's characteristics (social media is only part of it). And new marketing offers influence to contribute significantly to increasing net revenue.

  

<Company B's consultation example for customer segmentation>

 

Emerging; customer segmentation is for new journey

With the boom in e-commerce, companies are improving their marketing schema. Customer segmentation dramatically increases the growth opportunities of the enterprise and SMB. And the new user experience (UX) that consumers feel helps enhance and refresh the company's products and services. Through this process, companies can gain a deeper understanding of their customers and achieve the successful and differentiated marketing results they aim for.

 To use the vast amount of data accumulated at the enterprise CRM level to meet the owner's requirements, deliver customer segmentation consulting to achieve your company's vision and mission. It is the best way to get new opportunities aligned with an operational strategy.

Next, I will post a ‘Mobility Platform’ consulting case for gas and electric vehicle charging stations.

 

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