eCommerce Segmentation: Understanding Your Customers

Klaviyo eCommerce

I’ve written in this Klaviyo Review before about why I think it’s the best email marketing solution for Shopify store owners (and probably for WooCommerce too).

If you’re already using Klaviyo, then this post is for you.

Firstly, what is segmentation?

Segmentation means using data to sort your addressable audience into groups with common characteristics that make them likely to be motivated by similar things.

There are two kinds of data — descriptive and behavioral. Behavioral automations are generally far more profitable (11 times on average per recipient) than all out campaign blasts with no segmentation.

Behavioral automations can be based on interactions and purchases. For interactions, you can segment by recency and frequency, and for purchases, by recency, frequency and monetary (more below).

Secondly, why should you segment?

Segmentation means better deliverability, better results and more revenue.

The Fundamentals — Segments vs Lists

Segments are dynamic and the people that fill segments are those that meet the requirements you set. Segments are useful because it can answer questions about who are opening your emails, those that have opened but have not bought anything, those have have purchased at least 3 items for a total value of greater than $500.00, those that are receiving your emails but not doing anything with them.

Lists are static and they can grow when someone signs up or if you add someone manually.

Segments will look at all of the profiles/users including those that have unsubscribed (“suppressed profile”). So even if you send an email to that segment, the unsubscribed won’t get anything.

Why Bother Segmenting?

  • More targeted messaging
  • If you’ve been doing blasts to your whole list regularly, your deliverability will improve exponentially once you start segmenting (I might do a detailed post on this)
  • Better conversions and overall performance
  • Greater customer experience

Building A Segment

You can build a segment based on the following properties

  • This can be about what they’ve done or not done e.g. placing an order in your Shopify store or starting a checkout
  • Based on person’s details like the country they’re in or a custom field like whether the customer came from Facebook or Google
  • Whether a person is on a list
  • Predictive analytics about your customers — there are few minimum requirements for Klaviyo to be able to make this prediction like having at least 500 customers and at least some of them having ordered 3 or more times

Thinking About Customer Value

When thinking about segmentation, it’s useful to refer to RFM: Recency (when did they order on Shopify?), Frequency (How many times did they buy?), and Monetary (How much did they spend?). The importance is also ranked in this order. Someone that ordered yesterday but spent only $20 versus someone that spent $60 but several years ago; the person that spent $20 is far more likely to purchase again and therefore more likely to be a valuable customer going forward.

This is also true of general interactions. For example, someone that subscribed to your newsletter last week is far more likely to open your email than someone that subscribed say a year ago.

Here’s an example of how you can segment:

You can measure within Klaviyo all of these things as well as purchase, email and website engagement.

The easiest way to start to not feel overwhelmed are the Engaged Subscribers, Unengaged Subscribers, and VIPs.

If you have a very large list, then you should spend time thinking about all of the different segmentations that you can do in the customer engagement tiers. For smaller lists, it makes more sense to do some broad sweeps.

Using RFM, here are some ways for you to segment your audiences.

CORE AUDIENCE

The majority of your audience will be in this group and where you should spend the majority of your time.

  • Recent, Frequent, High Value
  • Recent, Not Frequent, High Value
  • Recent, Frequent
  • Recent, Frequent, Low Value
  • Recent, Not Frequent, Low Value
  • Recent, Not Frequent

WIN BACK

  • Lapsed, Frequent, High Value
  • Lapsed, Frequent, Low Value

WARNING

  • Lapsed, Not Frequent, High Value
  • Lapsed, Not Frequent, Low Value
  • Lapsed, Frequent

LEAVE

  • Lapsed, Not Frequent

Engaged Klaviyo Subscribers

These are the ones that have recently shown interest in your product. They are also the ones that you should talk to regularly whether it’s newsletter campaigns, product launches or promotions generally.

Engaged Subscriber Qualification

An engaged subscriber can be someone that has clicked or opened emails in the last 60 days and they’ve been on the list for at least 2 months so they had a chance to engage.

You can adjust the settings depending on how your open rates or clickthrough rates are doing.

To try and increase your engagement rates, you can get granular and look at the following data sources:

  • Product, Product Category
  • Time period
  • Amount Spent
  • Sign Up Source
  • Location
  • Gender

And then based on the above information, try different content:

  • Offer exclusivity (subscriber exclusive)
  • Sell value
  • Limited quantity
  • Time limited offer
  • Volume based offer
  • Free shipping
  • Discount
  • Social proof
  • Appeal for support

Unengaged Klaviyo Subscribers

You can suppress or delete them from your Klaviyo account. Suppressed profiles are not included in the Klaviyo Pricing.

Klaviyo does not charge for suppressed profiles

You can define this as someone that hasn’t engaged with your last 5, 10 or 15 emails (no opens, no clicks) for example. Another thing you can do is phase them out slowly with the sunset flow.

As a general rule of thumb, if they’re not doing anything, it’s better to unsubscribe them and keep only the engaged users onboard. They’ll bring down your general deliverability rate and keep your email subscription costs higher than they need to be. It’s easy to form an attachment to a big email list number but it really doesn’t make sense.

VIP Customers

These are your most loyal customers. I’ve noticed that Klaviyo automatically create a segment called VIP Customers and the definition is customers that have purchased X times or more. Klaviyo will also create a Repeat Buyer and Potential Purchasers segment. You can further define your VIP segment as someone that has purchased at least 3 times the average order value in the last 3 months and they’re in your regular email list — especially if you’re planning to email them regularly. So if customers typically order $100, then you’ll make this $300.

The VIP customers are the ones that you’ll want to reward with a loyalty program, send surprise thank you gifts, offer bonuses, encourage them to tell their friends about you — basically anything to let them know that they’re special.

Next Steps

To implement all of this:

  • Set up the foundation
  • Goal and strategy set up -> Plan
  • Segmentation based on Plan
  • Performance Check and Optimization

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