Customer Segmentation Phase 1

While you can segment on any criteria (as shown in the customer segmentation worksheet) we're going to cover best practices for creating a basic segmented weekly promotion. Basically this allows you to offer the right type of incentive instead of running blanket promotions for every customer. If you currently have less than 50% of your customers retained, you'll want to use the following guidelines. If you feel like you've already done this level of segmentation, feel free to skip ahead to Phase 2 Customer Segmentation. 

Phase 1 Customer Segmentation

In Phase 1, we will focus on 4 customer segments: 

  • One Time Buyers 
  • Non-Purchasers
  • Churning Customers 
  • Everyone Else 

Let's quickly review who falls into each category. Don't need a review? Skip to how to build your segments. You'll notice an email next to each cohort; these are segmented promotion that was run by Nantucket Brands. You'll notice that the creative is the exact same, all the changes is the incentive and language: 

One Time Buyers 

One Time Buyer Email | Customer SegmentationOne time buyers, you guessed it, have purchased from you once, but for whatever reason have yet to make their second purchase. Your goal is to get this cohort to purchase for a second time.

This segment may need a bit of a push to place their second order; however, don't go overboard as you don't want this group to get incentive happy and only buy from you with promotion codes. 


Non-Purchasers (Subscribers)

Non-Purchaser Segment Email | Customer Segmentation ExamplesNon-purchasers, also known as subscribers, have never made a purchase. Your goal is to move them to the one time buyer bucket. Make sure you watch your deliverability score when sending to this group as list churn can be anywhere from 25% or more a year, according to MarketingSherpa.

When thinking through the promotion, make sure that it's enticing enough without breaking the bank, so far they haven't shown interest; a solid discount should do the trick. 

Churning Customers

Churning Customer Email Example | Customer Segmentation ExamplesChurning customers are high value customers who once purchased from you quite often and since have fallen off the map. Well talk more about how to find these wayward souls later on. For now, your goal is to win back these customers.

Promotions should be fairly step for this cohort, they were valuable at one time and, if you can keep them, they should be valuable in the future. Make sure you're giving them a great deal.


Everyone Else

Segmented Promotional Email ExamplesAnyone who does not fall into the one time buyer, non-purchaser, or churning customer segments can be found here. Your goal is to keep these customers happily engaging with your brand in a relevant and meaningful way.

This segment should receive your normal promotions. In the email on the right you'll notice that customers get a free shirt when they purchase the shorts, this seems like a pretty intense discount and will help solidify the relationships Nantucket Brand's has been building. This is a great way to get rid of product - freebies, buy one get ones, and threshold free shipping are great discount strategies.

Creating Your Segments 

If you have access to data in a software platform, this is relatively easy to do. If you are pulling data manually from your eCommerce platform, these segmentation rules are still relatively easy; however, you will be working in a .csv, which you will then need to upload into your ESP. On that note, if you're interested in research platforms for things such as retention analytics and customer segmentation, we offer a 60 day trial of our software which includes access to custom segment builder. If you're interested, make sure to check it out here. Let's start by building out the churning customer segment as this is going to be the most complicated segment we build today. 

Churning Customers 

There are two options for creating your churning customer segment: 

  • Option 1: Days since last purchase is greater or equal to Y (rolling date range)
  • Option 2: Last purchase date is after X and Last Purchase date is before Y (static date range)

If you have access to product, purchase, and customer data on an ongoing basis, use option 1. If you are doing a data pull from your eCommerce platform, use option 2. Depending on the lifecycle of your product, the number of days between purchases will vary. We recommend using 10 days more than the median latency (days between purchases). If you're interested in learning how to calculate latency for your customers, download the Key Metrics Guide

One Time Buyers

For this particular cohort you will need to use two rules: 

  1. Number of Purchases is 1
  2. 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)

This second rule is used to exclude anyone who falls into the churning customer segment but has only made one purchase. This ensures that they do not receive two promotions on the same day with varying offers.

Non-Purchasers (Subscribers)

Here you also have a few options: 

  • Option 1: Number of orders equals 0 or is less than 1
  • Option 2: Monetary Rank is none of 1,2,3,4 AND Recency Rank is none of 1,2,3,4 (RFM Analysis) 

If you have access to data, use option 1. If you have to do a data pull, you may have to use Option 2 which relies on RFM analysis (get the low down here). Essentially you just want to make sure that you are only including people who have NEVER made a purchase, so any of the above will suffice.

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 than 1

Rule 1 excludes your churning customers; rule 2 excludes one time buyers and non-purchasers. 

So there you have it. You now have your segments built and you're ready to rock segmented weekly promotions. Want to see what Phase 2 is all about? Click on to learn more.