Customer Segmentation the Key for Small Businesses This Holiday Season
As the holiday season draws closer, small business owners are collectively trying to figure out how to compete with the big boys like Amazon.com and Wal-Mart. And while competing with these mega retailers may seem daunting, the good news is that you have a secret sauce at your disposal: customer segmentation.
The key for your small business to see big gains this holiday season is to focus on ensuring your existing customers come back to you. In order to leverage your existing customer base to the fullest, you must first identify various purchase behaviors, and then create specific customer segments based on those findings. From there, it's all about marketing and messaging, creating uniquely tailored offers for each of those groups.
While this exercise may require a bit of math and data analysis, the payoff will be completely worth your time and effort. Let's walk through each of the steps, shall we?
1. Start segmentation by studying purchase behavior. There are countless ways to slice and dice your customer data, and honestly, you probably already have a decent idea of the key purchase behaviors that will form your segments. One easy avenue to explore is demographics — e.g., age, gender, geographic location. Being able to segment your list by gender can be very helpful, especially if you sell different products for men and women, like apparel or health products.
Next, focus on purchase frequency — i.e., who are your most loyal and frequent customers? Once you have that segment created, look at the opposite and find which customers haven't made a purchase from you in the past six months or year. Another great segmentation approach is to study the types of products that different customers have purchased. For example, if you sell apparel, how many of your customers have bought blouses from you before? What about belts or accessories?