Customer Segmentation Phase 2

In a nutshell there isn't a huge difference between Phase 1 Segmentation and Phase 2. Essentially you're simply swaping your one-time buyer segment out for best customers. The reasoning behind this is as follows, as a retailer seeing over 50% retention of your customers, you have a large enough best customer cohort to market effectively to. So the four segments we will look at here are: 

  • Non-Purchaser
  • Churning Customers
  • Best Customers
  • Everyone Else 

Since we went over how to create the non-purchaser and churning customer in Phase 1 (click here for a refresher), we'll focus on how to build your best customer segment and your "everyone else" segment. But first, let's take a look at a segmented promotion that SkinMedix sent: 

Advanced Customer Segmentation Example

One interesting thing to note here is they they did not send a different incentive to every cohort (unlike Nantucket Brands), instead they lumped best customer and their everyone else segment together and upped the anti for churning customers and non-purchasers. I point this out only to say that you don't have to have four variations every single time. You know your brand and business, so use these segmentation rules as guidelines. 

Creating Your Segments:  

As I mentioned above, we aren't going to go over building your non-purchaser or churning customer segment since we covered that earlier. If you need a quick refresher, click here to view those segments. 

Best Customers

You will use three criteria to find your best customers: 

  1. Amount Spent is greater than W
  2. Number of orders is greater or equal to X
  3. Last purchase date is after Y or Number of days since last purchase is Z

"W" is equal to any threshold amount you want to use, "X" is the number of orders (we recommend at least 2), and "Z" is either a static date or rolling date range depending on which version you choose to use. Basically, rule 3 is just a catch all to esure that you are not including potentially churning customers in your best customer segment.

Everyone Else 

This is your catchall segment, so you will want to use the following rule to ensure your excluding the right people from this list:

  1. Last purchase date is after X (corresponds to date used for Y in option 2 for churning customers) or Days since last purchase is less than Y (corresponds to number used for Y in option 1 for churning customers)
  2. Number of orders is greater or equal to 1 AND less than X (corresponds to number of orders for best customers)

Rule 1 excludes your churning customers; rule 2 excludes one time buyers and best customers.

With this information, you're all set to start segmenting your newsletters by buying cohort to ensure you're offering the right incentives and not creating coupon happy customers. If you're ready to move on to tackling behavioral segmentation, simply cick the button below.