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How Demographic Segmentation Contributes to CLV Improvements - eCommerce
How Demographic Segmentation Contributes to CLV Improvements - eCommerce

How Demographic Segmentation Contributes to CLV Improvements - eCommerce

Updated At:
Sep 15, 2023

Introduction

Understanding your target audience is crucial for a successful eCommerce business. Demographic segmentation is an essential tool that enables businesses to divide their target audience into groups based on shared characteristics. This article focuses on how eCommerce marketing professionals can leverage demographic segmentation to improve their Lifetime Value (CLV).

What is Customer Segmentation in eCommerce

Customer segmentation is the process of dividing a customer base into groups with similar needs, preferences, and behaviors. In eCommerce, this practice allows businesses to tailor their marketing strategies, products, and services to better cater to the specific needs of each customer segment.

What is Demographic Segmentation

Demographic Segmentation Basics

Demographic segmentation is a method of customer segmentation that involves dividing a target audience based on attribute data such as age, gender, family structure, income level, occupation, and education. When people think of segmentation, the first thing that comes to mind is often customer segmentation based on age and gender. This approach is popular because it is easy to obtain statistical data related to each segment.

Importance of Lifecycle in Segmentation

However, not much attention is given to why segmentation based on demographics is important. The key point is that demographic segmentation is useful as a proxy variable for needs related to the lifecycle. The lifecycle, in this context, refers to the progress and stages of each consumer's life. Customer segmentation aims to create clusters of people with the same needs, making it crucial to consider the lifecycle when segmenting customers.

Utilizing Demographics for Targeted Marketing

For instance, if a product focuses on life events such as marriage and childbirth, the segment of people in their late 20s to early 30s becomes important. For high-income investment products, using data on income levels and education is valuable. In the case of apparel or cosmetics, products might be divided into more detailed age groups.

How to Utilize Demographic Segmentation in eCommerce

To effectively utilize demographic segmentation in eCommerce, it's crucial to first determine whether demographic data segmentation is meaningful for your business and if marketing efforts will be effective after segmentation. Here are some examples of how demographic segmentation can be applied to different eCommerce businesses:

Age-based segmentation

If a product focuses on life events such as marriage and childbirth, targeting people in their late 20s to early 30s might be important. For instance, eCommerce businesses selling wedding-related products or baby care items can tailor their marketing efforts to this age group.

Income and education-based segmentation

High-income investment products can benefit from targeting customers based on their income level and education. This approach enables eCommerce businesses to cater to customers who are more likely to invest in premium products and services.

Gender-based segmentation

Although gender-based segmentation may not be suitable for all products, certain products like cosmetics and apparel might benefit from targeting specific gender groups. For example, a men's skincare brand selling online could create targeted marketing campaigns aimed at male customers.

Segmenting based on occupation

eCommerce businesses can target specific occupations or industries to tailor their products and services. For example, a company selling office furniture online may focus on targeting employees in corporate environments, while a business offering industrial equipment might target workers in the manufacturing industry.

Cultural background segmentation

Demographic segmentation allows eCommerce businesses to group customers by ethnicity, religion, and nationality. This strategy can be particularly beneficial for businesses selling food or products from specific cuisines. For example, an online Asian supermarket might cater to Asian expats living in a particular country by offering familiar products and a bilingual website experience.

Utilize Demographic Segmentation in Marketing

To get the most out of demographic segmentation in eCommerce, businesses should:

  1. Analyze customer data to determine the most relevant demographic variables for their target audience.
  2. Segment their customer base according to the identified variables.
  3. Develop targeted marketing campaigns, products, and services that cater to the unique needs of each demographic group.
  4. Monitor and evaluate the performance of their marketing efforts to ensure they are reaching the right audience and making an impact.

Summary

Demographic segmentation is a valuable tool for eCommerce businesses looking to improve their Lifetime Value (CLV) by tailoring their marketing strategies, products, and services to the unique needs of each customer group. By understanding their target audience's demographics, businesses can create targeted marketing campaigns and develop products and services that cater to the unique needs of each group.

When using demographic segmentation, it's essential to consider other methods for identifying customers with the same needs, such as behavioral segmentation, RFM segmentation, and geographic segmentation. Combining demographic segmentation with these other methods can provide a more comprehensive view of your target audience and improve your marketing efforts.

Combining demographic segmentation with other methods such as behavioral, RFM, and geographic segmentation can provide a more comprehensive view of your target audience, ultimately improving your marketing efforts and overall business performance.

Author
ECPower Inc.

ECPower Inc., which develops and provides the customer segment & journey management tool 'ECPower,' has edited and supervised this article. We deliver content based on the experience of operating ECPower and supporting CLV growth and repeat nurturing for ecommerce businesses.

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