Category: Customer Lifecycle

CRM Strategy

Analyzing Sephora And Its Unique Segmentation Efforts

Sephora is heaven for makeup-obsessed consumers. While Sephora does not release its financial results, Sephora generated retail sales of up to 5.9 billion U.S. dollars in the United States. One way the beauty retailer has built success is by leveraging customer segmentation to identify profitable customers and drive business growth.

Let’s take a look at Sephora’s unique segmentation strategy.

Customer Lifecycle

Sephora segments customers based on where they are in the customer life cycle. This helps the brand to address its audience’s specific needs as they go from a prospect to a loyal customer. Here’s how Sephora segments its audience.

New Customers: Once consumers sign up for Sephora emails, they receive a set of welcome emails. The first email informs them of the benefits of shopping with Sephora. The second email includes a quiz that helps Sephora gather valuable segmentation data about its new customers. The third email gives personalized product picks based on the customer’s data.

Active Customers: Once prospects become customers, Sephora keeps them engaged and encourages repeat purchases by sending a series of special offers and deals on skincare and makeup products.

 For instance, Sephora also sends new deals and weekly promos to loyal customers. Rather than sending coupons to everyone on their list, Sephora segments the list based on customers’ spending habits, and tailors offers to fit them. For instance, high-value VIB and Rouge customers get a free trial set with a $35 purchase.

Churned Customers: Sephora re-engages churned customers with win-back campaigns. The emails contain product discount codes that encourage customers to make a purchase. However, customers have to spend a minimum amount to get the discount, which is an excellent way to improve AOV.

 

The guide to advanced customer segmentation

Location

Sephora uses geographic segmentation to offer personalized experiences to its customers, increase sales, and build customer loyalty. Let’s take a look at Sephora’s International websites. Sephora has websites covering countries in North America, Europe, Asia, South America, and Australia.

Each country’s website is designed to appeal to the buying behavior of customers in different geographical locations.  For instance, as at the time of writing this article, the Sephora Brazil website homepage features Black Friday Deals. In contrast, the Sephora Italy website has an offer on Halloween makeup.

To strike a chord with local audiences, Sephora works on country-specific collaborations. For instance, the brand collaborated with French beauty influencer TheDollBeauty for a makeup collection.

Local Events: Sephora uses its subscriber’s location data to send targeted emails to let them know about upcoming in-store events in their area. These events encourage shoppers to discover new products in-store, meet their favorite brand owners, and attend makeup classes.

Customer Lifetime Value

Sephora segments its customers into tiers based on their value. This helps them retain valuable customers, increase revenue from less valuable customers, and improve overall customer experience. See how Sephora segments and manages relationships with its customers through its Beauty Insider program.

Rouge: Sephora customers who spend $1000 are known as Rouge customers. These high-value customers get exclusive regards and perks to increase their spending. They get 20% off on seasonal saving events, free standard shipping with no minimum orders, and exclusive perks.  Sephora also upsells these high spenders by sending them recommendations containing high margin products from their favorite categories.

VIB: Customers who spend an accumulated value of $350 are VIB customers. They get 15% off on seasonal saving events, free standard shipping when they spend $35 on orders, and $15 savings.

Insiders: Customer in this segment are often new shoppers. To encourage these customers to increase their spending, Sephora gives them 10% off on seasonal saving events, free standard shipping when they spend $50 minimum, and $15% dollar savings.  Sephora also offers free samples to these shoppers to encourage them to buy full-sized products after they try.

Behavioral Segmentation

Sephora uses behavioral segmentation to create a pool of tailored audiences and increases conversions at various stages in the customer journey.  Leveraging customer data on how consumers interact with products, Sephora can create unique customer segments and use this data to tailor future messaging.

Shoppers who browsed a product that has dropped in price: Sephora sends price drop alerts to inform shoppers when their favorite product has been discounted. This provides extra encouragement for price-conscious shoppers and increases brand loyalty.

Customers Who Browsed an out-of-stock product: Sephora segments customers who browse an out-of-stock item and sends them notifications once the product is back in stock. The back in stock emails encourages customers to purchase restocked items by warning them that the product might sell out again.

The back in stock emails are paired with “just for you” recommendations and deals on a customer’s favorite brands to push customers make a purchase.

Browsed and Didn’t Make a Purchase:  Sephora has a segment for consumers who browse products but didn’t make a purchase.

The emails are designed to ensure customers remember what item they viewed. The email subject line “Sephora Shopper, still thinking about L’ABSOLU Gloss” focuses on what the customer was browsing, and the email content pushes them to take the next step by adding the item in a basket.

In case consumers don’t want the items they viewed, Sephora helps them find relevant products by asking them to take a short quiz.  The quiz narrows down products by type and consumer concern.

No doubt, segmentation is key to delivering 1:1 experiences to consumers and Sephora does it well. To win with segmentation, leverage your customer data. Have a CDP in your technology stack to build a unified customer profile and map out your customer journey in real-time.

Finally, leverage dynamic segmentation tools to enable your CRM team to predict consumer behavior and identify which customers are worth spending your marketing resources on.

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