Category: Segmentation

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.

The post Analyzing Sephora And Its Unique Segmentation Efforts appeared first on Post Funnel.

CRM Strategy

5 Segmentation Pitfalls and How to Avoid Them

Segmentation is key to delivering 1:1 experiences to consumers. However, poor segmentation practices can cause your segmentation efforts to fail. In this article, we identify five segmentation pitfalls and how to avoid them.

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1.Relying on Static Segmentation

Consumer shopping behavior is constantly evolving. For instance, we’ve seen consumers shift to purchasing in larger quantities, trying new brands, and increasing online orders due to COVID-19.  Therefore, if you’re relying on static segmentation, you’ll always be playing catch up. Static segmentation gives you a dated understanding of your customers and prevents you from marketing to them effectively. To meet consumers’ evolving needs, adopt a dynamic segmentation.

Dynamic segmentation uses real-time consumer data to continuously update consumer segments that shrink or expand as individuals move in and out of the segments. For example, with dynamic segmentation, a beauty brand might discover that its traditional beauty enthusiast segment is starting to split into “Korean beauty” or “indie beauty” cohorts based on a deeper understanding of behaviors, context, and needs.

When using dynamic segmentation, look for shifts in size, behavior, and engagement.  Analyze customers based on their movement among segments and track how customers move from one segment to another over time. If you notice a change in consumer behavior, see if your current messaging still resonates with each segment, or you need to rework your approach.

Leverage dynamic segmentation tools with propensity modeling and machine learning capabilities to enable you to predict consumer behavior and identify which traits are most productive in converting, driving repeat purchase, and consumer engagement.  Revisit your segmentation strategy periodically.

2. Going Too Granular

With consumers demanding 1:1 experiences, granular segmentation based on attributes such as lifestyle, propensity to purchase, and psychographic data can help you deliver personalized experiences. However, breaking your audience into smaller and smaller segments can sometimes lead to groupings that will be of little to no use to you. For example, segmenting an audience based on whether they’re shy or easy going when you’re selling apparel won’t help you better understand your audience’s needs.

While segmentation offers nearly endless possibilities for how you can look at your audience, don’t segment yourself to death. When segmenting your audience, each segment you discover is substantial enough to generate revenue and be profitable.

So, it’s crucial you understand your audience’s purchasing power and propensity to pay premium prices. The segment should be suitably different from other segments. Ask yourself if this segment will respond differently to marketing content. The segment should be reachable and targetable.

Use a segmentation tool that allows you to discover the most statistically significant differences among segments automatically.

3. Using Poor Quality Data

Segmenting your audience using inaccurate and outdated data is a quick way to get erroneous segmentation results and fail in your marketing. In fact, 95% of organizations see negative impacts from poor data quality, resulting in wasted resources and additional costs. Remember P&G’s marketing blunder with Gillette? Gillette accidentally sent razors to women and older men when intended for 18-year-old men.

Avoid segmentation related marketing mistakes by first reviewing your customer data to determine common errors within your database and implement a data quality strategy based on your insight. Leverage data enrichment tools to fill up data gaps, verify customer details and correct inaccurate information in your database. Use an enrichment tool that can give you access to granular information, such as the number of people in a household and their socio-economic situation.

Invest in tools that validate the accuracy of your data in real-time, clean information like list imports, and have an intuitive engine that prompts for data clarification. To consistently keep your data accurate, make data cleansing a regular process, and choose a data enrichment solution that can rapidly enrich, process, and analyze information. Also, develop practices around data remediation and data monitoring to maintain quality over time.

The guide to advanced customer segmentation

4. Forgetting the Customer Journey

Not incorporating your customer journey into your segmentation strategy is another pitfall you should avoid. Customer journey stage based segmentation enables you to know where in the buying process your customer is, identify touch points where they drop off and how to engage them with personalized offers and contextual messages. About, 33% of consumers are receptive to targeted ads that are contextually relevant to the site they are browsing.

To win with this strategy, map your customer journey across all physical and digital touchpoints. Ensure customer journeys are connected to all the different data sources and apply machine learning to spot common and uncommon patterns.

Consider leveraging a CDP with customer journey orchestration capabilities to provide simple journey configuration and deliver personalization at scale. Look for a solution that supports affinity-driven journeys, predictive modeling, and journey analytics.

5. Clinging to Basic Segmentation Strategies

In a world where consumers demand hyper-personalized experiences, mainly looking at attributes such as demographics, geographic and socio-economic data to segment consumer groups won’t help you deliver targeted messaging and communications.

Improve your segmentation strategy by leveraging predictive segmentation. This segmentation method leverages machine learning to group customers by their likelihood or propensity to exhibit a future behavior such as the probability that they will visit your store in the next 30 days, or churn from your subscription service. Thereby enabling you to understand each customer and how to market to them proactively. When using predictive segmentation, choose a predictive segmentation tool that leverages behavioral insights, builds goal-driven segments, and analyzes data to make recommendations that help you find and grow your target audience.

Your segmentation should also include some form of life events such as a new home, a birthday, or a job switch. This will help you understand customer intent and create strong messaging most likely apt to appeal to each customer’s situation.

About 50% of marketers consider life events as a new sales opportunity, while 70% state that life events provide a reason to engage with customers. Collect customer life events data through multiple channels- in real-time and enhance this with third party data to better inform retention campaigns. Make sure you have customer consent when collecting live event data.

 Segment Right

Segmentation implementation is filled with pitfalls that can break your business. In addition to the solution presented above, improve your segmentation strategy by basing your segmentation on qualitative and quantitative research. This will help you to learn how consumers think, shop, and use your products. Additionally, set clear segmentation goals and identify opportunities for action after segmentation.

 

The post 5 Segmentation Pitfalls and How to Avoid Them appeared first on Post Funnel.

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