What is E-commerce?

Ecommerce is far more than the online buying and selling. It is the digital enablement of commercial transactions which are carried out on the Internet. Ever since the evolvement of the internet, businesses have become much easier. Ecommerce as compared to traditional commerce is much more beneficial to the companies. It brings them closer to the consumers. It helps businesses to grow and expand to national and international markets, attracting target customers from these markets also. It aims at speeding up the processes involved with the online purchasing to make services better for consumers. It helps in building the right marketing strategies to attract the right customers at the right time in the right place, which is the aim of every business.

Why Segmentation?

Customer’s segmentation is a very important aspect of ecommerce, because businesses highly rely on it to predict customer’s behaviors, preferences, loyalty, and to analyze the target market and customer’s buying patterns.

Reduces cost

Segmentation can help a business to reduce costs that are unnecessary for it to bear. This helps in identifying customers, so the brand can decide which customers to provide discounts. This way the brand will not provide discounts to the disloyal customers which will help it to lower costs.

Providing value to loyal customers

As segmentation can help you find loyal customers, a brand can work on providing more value to these customers to keep them committed, loyal, and engaged to a brand for the long term. Retaining loyal customers is an easy job for the brands than to acquire new customers and satisfying them.

How to segment customers?

Segmentation involves categorizing the customers with some common characteristics or preferences in a group. This makes it a lot easier for brands to communicate with different customers, and to target a group of customers according to their needs, wants, and desires. However, one effective way to segment customers in ecommerce is via RFM Analysis. This is known strategy that helps virtual businesses to analyze and understand their customers. The main objective of this analysis is to find out the potential buyers of the future. It works on the principles of marketing. It views the historic data of the customers buying patterns, and use it to predict future sales. It performs the following tasks,

  • Identify customers who show more engagement.
  • Analyze customers purchase history and buying patterns.
  • Predicts which customers will stay committed in future and maintain long term relationships with the brand.
  • Segments the loyal, unfaithful, and customers who left your services for competitors.

However there are other known ways to segment customers as well but this is the most popular strategy. You might be wondering what is RFM. It is marketing technique which helps to measure customer worth and value. It carries out a vast research on the consumers buying behaviors and patterns using historic data before segmenting the customers. Businesses operating on the web are highly benefitting from this strategy. All the information which is gathered or identified is based on three findings.

  • When did the customer make a recent purchase with your brand?
  • What is the frequency with which customer buys a product or service from your brand?
  • What is the amount of money a customer spends on your brand by purchasing your products or services?

On the basis if these three findings, customer segmentation is done.