The first step to a successful marketing campaign is customer segmentation and subsequent identification for proper targeting. The criteria for basic segmentation in the B2C market can be different, for example:
a) geographic - countries, regions, cities
b) demographic - gender, age, education, income, life stage, generation, social class
c) psychographic - personality, lifestyle, social class
d) behavioural - on the basis of customer behaviour and reactions (attitude towards the product, familiarity with it, frequency of use, loyalty to the product)
A more detailed and frequently used method of customer segmentation is the RFM method. It assigns values to consumers based on three variables: the time elapsed since the last purchase (recency), the frequency of purchases (frequency) and the monetary value of the spend (monetary).
Based on internal data, consumers are divided into several segments according to the above criteria and assigned values. For example, the RFM model may look like this:
Of course, all values will be based on the market segment in which you do business. The frequency of purchases for an e‑grocery store and an e‑shop with more expensive household appliances will differ really significantly.
The customers with the highest values are, of course, the most profitable. Once they have been identified, common characteristics and buying behaviour can be observed, allowing us to better target marketing activities. How to take advantage of this? For example, we can offer them a frequent buyer discount, a bonus on their next purchase, a loyalty programme or a limited offer.
Similarly, we can easily identify customers who haven't bought from us for a long time or don't buy as often. For example, we can send them a newsletter to remind them or a questionnaire to find out why their interest has waned. Another option is to offer a promotional offer to motivate the customer to visit again.
What are cohorts and how can they help you
Cohort reports, or cohorts for short, are an indispensable tool for customer segmentation, not only for e‑shops. They are part of Google Analytics and can, for example, identify
- what customers have in common,
- how their behaviour is changing,
- how many of them bought our product during the month,
- how many of them returned the following month,
- which channels bring in the most customers.
The combination of segmenting your own database and using cohorts will give you a really powerful tool to use in customer retention. However, if you are serious about customer retention, you definitely shouldn't stay with just these two elements.
What all to do for customer retention?
The cost of acquiring a new customer can be up to 5 times higher than the cost of retaining an existing client. That's why the slogan "Our goal is a loyal customer" should definitely not just stay on paper. What are the other reasons? Over the years, loyal customers spend more money and are also a source of valuable criticism and positive references.
In addition to differences in frequency and spend, customers also have different product knowledge and attitudes towards the product. How to track these soft characteristics? The so-called Marketing Funnel serves us.
The model illustrates the different stages a customer is at in their relationship with a brand, in an ideal scenario that culminates in a purchase. Of course, it doesn't always work like that in practice; the customer may forget about the brand and its product, or at some stage abandon the purchase consideration process altogether.
To see where customers are being lost and why, we need to look at the transitions between the stages. Why, for example, do 50% of respondents have an experience with our product but only 10% have purchased it a second time?
For the most loyal customers, the maximum
What does the Funnel look like in practice?
- At the beginning, there are customers who are aware that the brand exists. These customers need to be motivated to try the product.
- The next step is to convince the customer of the quality of the product so that they start using it regularly. If we want to increase the frequency of use, we can, for example, promote new uses.
- In the penultimate stage, our customer prefers the brand over others, but if it is not available, he will settle for another.
- In the final phase, the customer becomes an advocate of the brand; he is loyal to it, shows interest in new information concerning it, gives it positive publicity for free and is a member of the community around the brand.
Such a customer is the most valuable and it is essential to take care of them really carefully. There are a number of ways to reward them: publishing a fan post or publicly thanking them on social media, sending them a gift, inviting them to a showroom, giving them the opportunity to work with the brand, VIP events, sending them products to review, or even giving them early access to a new collection or product line.
Motivate customers with a loyalty program
Customer information gathered through segmentation and the customer marketing funnel can help you create loyalty programmes. These both motivate further purchases and also serve as a tool to reward customers, thus strengthening the relationship between the client and you.
Forms of loyalty programme
- Collecting. Most often, a loyalty program is based on collecting points (on a card or account), for example for a purchase, a referral to a friend or a review.
- Spending. The second form is the simplest and is also used by Slevomat = the more money spent, the better the benefits or gifts.
- Rewards for a regular fee. A loyalty program can also be fee-based, for example, so that members pay a monthly or annual fee and receive benefits in return. An example would be Amazon Prime.
For the incentive to really work, it is important that the loyalty programme presents real benefits for the customer that they can actually use. There are many things you can come up with for your clients, including
- the opportunity to enter competitions,
- access to unique offers,
- invitations to special events,
- a total discount,
- discount on selected products,
- free samples, services or products,
- free postage.