Thursday, December 31, 2009

User Segmentation

Segmentation is a term you will often hear in the context of analytics and web analytics is no exception. Segmentation gives you insight into the kind of users who are visiting your website and thus helps in understanding your key users and then concentrating to improve on the requirements of your website(or blog) around those users. Segmentation is a very generic  term and the context becomes very important. For example you can decide to segment your users based on various demographics (age group, sex, income, location) to better understand them. Since I am operating in the retail sector, let me give you an example of what I am talking about to give you a better understanding of the term "segmentation". Say you operate a retail chain and have a ecommerce website which augments your store sells through online sells as well as sending customers to your stores.

Say you want to improve the sales. The first step you need to take towards this end is to understand the demographics of the users who visit your site (and subsequently make a purchase either online or come to your stores to make the final purchase after checking your products online). More specifically you would like to understand what is the percentage of male/ female users of your site, the age groups these users belong to, the income group they belong to , the average distance of your stores from the place where your customers are located. This information will help you in the following ways:

  1. Based on this segmentation information, you can better optimize your site to target the customers who actually buy something from you.
  2. It will help you to understand, which segments are not purchasing from you (area of improvement)
  3. Which segment of the customers prefer looking for products online before making the final purchase at one of your stores located near them
  4. Segmentation by keywords will help you understand what the customers are looking for and thus help you to stock accordingly.
  5. Segmenting the customers based on the purchases they make will get you key insights into the customers who are more likely to buy from you which in turn will help you to have dedicated marketing campaign focused on these groups.
  6. Segmentation by traffic source will help you understand the sources your customers are coming in from (email campaign, affiliate sites, organic and paid search) and thus help you to evaluate which campaigns are working, if your SEO is good enough, etc.

The list is endless and the potential even bigger. The more you segment your users/customers the better you will understand them and the better the chances that you will woo them into converting in the future. After all the customer is always right and you need to look out for the subtle hints they drop, and what better way to understand them than to segment them into groups. Below are a few examples of simple segmentation you can achieve. Click on the images to enlarge them:

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