DIY Hack: Segmenting Your First Timers to Keep Them Coming Back
By using only two characteristics from the “first purchase” stage data, this DIY guide will help you divide your first timers into more than a dozen groups, and help you find the right campaign for every customer
A customer’s first order is a significant stepping stone to the continued success of the customer journey and the longevity of your relationship with your customer.
By correctly understanding and using “first purchase” characteristics, you can expand the consumer’s potential after converting them to a new customer.
In this article, we’ll show you a useful and straightforward way to segment your customers who have already made a first purchase. The segmentation will be based on two main characteristics from the first purchase: Number of items purchased, and purchase amount. We’ll also share some marketing insights for each segment that will help you build the most effective campaign. Let’s get started.
Excel in your Excel
Starting out, you need to gather the data mentioned below from all first purchases made by your customers in your chosen length of time (anywhere between the last 3 months and the last year).
Number of items
Purchase amount
Then, as the next step, enter all the data from above into an excel sheet, and build a histogram for each one of the variables. It should look something like this:
At this stage, you have to divide each of the variables into categories in such a way that each category exemplifies a percentage of customers who purchased up to, or between a certain threshold.
The divisions will be based on the percentages.
The percentage brackets are based on benchmark data collected from Optimove’s e-commerce customers, to create separate and distinct groups.
The distinct categories for number of items:
We will define the first category to be the bracket of the first 50% (lowest number of items.) The second bracket will be defined at 30%, the third bracket at 15%, and the last bracket is at 5% (the highest number of items.)
The distinct categories for purchase amount:
The overall trend for purchase amount does not distribute normally, nor exponentially. Our goal is to define a smaller segment for a smaller order amount, a larger group for a medium order amount, a medium segment for a large order amount, and a small group for the largest order amount.
The final step is where things get interesting: Each customer will receive a descriptive word to represent two variables – low, mid, high, very high – to describe the combined activity of both variables. At this stage, after assigning a word combination to each customer, we can define segmentation for 16 different segments:
We ended up with 16 different customer groups based only on the two attributes collected during their first purchase. Imagine how many different customer groups you can determine by adding one more attribute of any kind to your list.
Build and Tweak:
Smart marketers know how to reach these segmented groups accordingly. Now, when you have these different segments you can start addressing them in the most efficient way: Here are some insights you can turn into actionable steps for each polar segment (indicated above):
Very high order amount, low number of items: For this segment, the best course of action is to send a “cross selling” campaign for items that will complement their previous purchase. We will create a campaign that advertises related items at a lower cost.
Low order amount, very high number of items: This segment is most likely to respond best to campaigns that encourage them to buy products that are similar to items already purchased, and by using discount codes, we can encourage them to spend more money.
Very high order amount, very high number of items: These are your potential VIPs! Treat them accordingly. Take care to keep them satisfied and loyal. Make sure to stay in contact with them and send campaigns for similar items at better rates.
Low order amount, low number of items: Here, you should really focus on improving the relationship with your customers. Your campaign should feature a larger discount for their next order. The incentive in this campaign should leave them wanting to come back and order again.
The recommendations above address the polar segments, but they can be used for each of the 16 segments above. Each one should be tweaked and adjusted to fit the rest of the segments. For example, low order amount with a medium number of items is close to low order and low number, so in this case a good campaign will have a discount incentive but might offer a lower discount amount.
In conclusion: By segmenting your customers in an effective manner, and using the right campaigns to target each segment, we will succeed in helping them move to the next step in the customer journey, and they’ll quickly be on the road to a long-term relationship with your brand.
Eilon Morgenstern, a Product Manager at Optimove. He thoroughly enjoys turning data into valuable business insights and actionable lessons. Eilon holds a BSc in Industrial Engineering and Management from Tel Aviv University.
