Segmenting customers based on buying behavior

Challenge

An FMCG company was struggling with the fundamental task of effectively segmenting its customer base. Despite possessing a large amount of customer data, they lacked a coherent strategy to tailor marketing communications to different groups. The objective was to implement customer segmentation based on shopping behavior to gain a deeper understanding of customer needs and significantly boost marketing effectiveness. They selected iPresso Marketing Automation as the tool to achieve this.

Action

The company established a data-centric segmentation and personalization workflow:

1. Data Collection and Analysis: Using iPresso, the company collected comprehensive data on customer behavior, including purchase history, frequency, average order value (AOV), and product types purchased. This data was automatically stored on individual customer cards within the contact database, providing instant access to full contact history for marketers.
2. Segmentation Criteria (RFM Analysis): The company defined segmentation criteria using the RFM analysis feature available in iPresso, focusing on key purchasing indicators:
   
   • Recency: How recently the customer made their last purchase.
   • Frequency: How often the customer makes purchases.
   • Monetary: The total value the customer spends.
   • Product Type: The categories the customer buys most often.
   • Campaign Reactions: Engagement with previous marketing campaigns and offers.
3. Creating Customer Segments: Based on the RFM data, customers were divided into precise segments, such as:
   
   • Top Customers: High purchase frequency and high AOV.
   • New Customers: Recently made their first purchase.
   • Potential Loyal Customers: High purchase frequency but medium AOV.
   • Price-Sensitive Customers: Frequently buy products only when on promotion.
   • Recoverable Customers: Used to buy frequently but have been inactive for a long time.
4. Personalization of Marketing Campaigns: The company developed tailored marketing campaigns for each segment using iPresso’s functionality:
   
   • Top Customers: Exclusive offers, loyalty programs, priority access to new products.
   • New Customers: Welcome discounts, shopping guides, popular product suggestions.
   • Potential Loyal Customers: Special promotions, incentives to increase purchase frequency, targeted product recommendations.
   • Price-Sensitive Customers: Consistent information on discounts, package deals.
   • Recoverable Customers: Reactivation campaigns with attractive incentives, surveys asking about reasons for churn.
5. Monitoring and Optimization: The company implemented continuous monitoring of campaign performance, tracking open rates, clicks, conversions, and AOV. Campaigns were regularly optimized based on these results to maximize effectiveness.

Results

The strategic implementation of RFM-based segmentation led to significant improvements in engagement and profitability:

• Customer Engagement: Personalized campaigns boosted engagement: Email open rates increased by 15% and click-through rates (CTR) by 8%.
• Conversion Rate: Effective segmentation and communication resulted in an 18% increase in conversion rates, as customers received highly relevant, tailored offers.
• Average Order Value (AOV): Personalized product recommendations and package offers contributed to a 15% increase in AOV.
• Customer Retention: Loyalty and reactivation efforts led to a substantial 22% increase in customer retention.
• Budget Efficiency: Precise segmentation and improved campaign effectiveness enabled the company to use its marketing budget more efficiently, reducing the cost of customer acquisition and increasing the campaign ROI.