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    Segmenting Your Market with Web Analytics

    Direct marketers are always looking for ways to improve targeting to make a bigger impact on their audience. One traditional approach is "market segmentation," where people are grouped by a set of common characteristics.

    The idea behind segmentation is that it allows us to describe product benefits in ways that have a high impact on a particular target market. This is an effective marketing strategy because the same features in a product provide different benefits to different groups of people.

    So, it makes sense to segment the audience into groups where the marketing message can be tailored to appeal to the people who are most likely to respond. In other words, market segmentation helps to easily classify your customers and find more like them.

    Benefits of Market Segmentation on the Web

    But there is another benefit to market segmentation on the Web.

    Segmenting Web visitors allows us to not only select which message to deliver to each individual, but also helps us learn about the needs and interests of each group of people.

    So what can we actually learn by segmenting our market?

    Perhaps the easiest thing to learn is which products are purchased by the same types of people.

    By just using your customer data file it's possible to segment your audience by geography, season, order size, frequency of purchase, and other data that you already collect.

    For example, how does the geographic distribution of your customers compare to the country as a whole?

    California has about 12 percent of the US population, so if less than 12 percent of your U.S. customers are from California, that segment might not respond to the same marketing messages as other regions. By targeting a different marketing message to that market segment, you might find that results are higher than sending the same email newsletter to everyone.

    Many traditional direct marketers project the profitability of customer segments by just using the recency of the latest order, the frequency of ordering, and the monetary size of the order (RFM Analysis).

    In addition to RFM analysis, Web marketers have an additional source of data -- Web analytics data that can be combined with purchase data. We can learn a great deal about our customers by looking for patterns of Web behavior that lead to greater revenue.

    By relating your Web analytics data to your customer database, you can answer more complex Web-related questions that can't be answered based on Web browsing behavior alone such as:

    • Is the cumulative amount of time spent on the site during multiple sessions related to inquiry or sales activity?
    • Is the number of visits to the Web site a predictor of e-commerce sales?
    • What is the clickthrough rate for each product page to the shopping cart page?
    • Are people who come to your Web site from one search engine more likely to make a purchase than people using the same search phrase at a different search engine?

    There are almost as many ways to segment a market as there are data that can be collected. Fortunately, there are tools available for Web marketers to make sense of the massive amount of data.

    Using Web Analytics in Monitoring Market Segments

    Most Web analytics systems allow you to track purchases made in the Web site's shopping cart.

    • Add Web analytics codes to the shopping cart to track relate the products purchased to the Web pages they visited.
    • Ensure that online ads contain the proper source and campaign codes to relate ad clicks to the Web pages they visited.
    • Add source and campaign codes to links in e-mail newsletters, and blasts. to relate ad clicks to the Web pages they visited.

    As more companies integrate Web analytics into their e-commerce into their sites, Web marketers will be able to use market segmentation to learn more about their customers and improve performance of each aspect of Web marketing.

    All of the major Web analytics systems can report on traffic by custom market segments.

    For example, you could identify certain visitors as "price conscious" or "quality conscious." Then, compare the types of products purchased by "price" customers and "quality" customers. If the segments bought different products, you have an opportunity to tailor your message for each segment.

    Many advertisers that use Google AdWords also use Google Analytics, or another Web analytics system, to track visitors starting with when they click on an ad all the way through to making a purchase. This means it's now possible to calculate the marketing ROI of each aspect of a search engine marketing campaign.

    Segmenting customers by which ad they responded to is valuable, but it's more valuable to segment visitors by their interests, buying motivations, and decision criteria.

    Consider segmenting visitors by which type of pages they visited first, such as:

    • Pricing options or product features
    • Inexpensive or high-end products
    • Indoor or outdoor products
    • Men's, women's, or children's products
    • New products or replacement parts
    • Small office/home office (SOHO) products or enterprise products
    • Benefits pages: save time, save money, increase productivity, or increase shareholder value

    Customer Created Market Segments

    Customer segments don't have to be customer groups that you choose. Sometimes customer segments form on their own.

    Look for common characteristics or behaviors. Then, you've identified a new market segment.

    For instance, if a group of customers buy what appear to be unrelated products, try cross-promoting the two products and see if other customers in the segment buy that combination, too. By using market segmentation tools and techniques, unique groups of people can be identified and marketing programs created to take advantage of this opportunity.

    Look for clusters of product pages visited by people who eventually bought a product in the cluster

    Then, look for other products that share the same cluster of pages visited. You've found a product cluster that should be cross-promoted. Use product bundles of two or more items together, or other types of incentives, to encourage customers in the segment to buy multiple products in the product cluster. This reduces your marketing costs and keeps those customers from buying from other Web sites.

    Be sure to monitor a segment's behavior to learn which information pages they visit and products they buy. Based on that information, update your site to guide more people in the segment to become customers.

    You're already spending resources to bring people to your Web site. Learn from their behavior how to increase the number of visitors who become customers. This will increase your marketing ROI.

    Cliff Allen is the co-author of the book One-to-One Web Marketing; 2nd Ed., published by John Wiley & Sons, and has consulted with companies on strategic marketing for 20 years.

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