How to Use Customer Segmentation to Establish Long-Term Loyalty

September 12, 2019

Customers come in all shapes and sizes. They engage with brands differently, respond to varied forms of marketing and exhibit unique buying behaviours. As a result, customer segmentation is vital. You need to understand a breakdown of your audience, so you can target them with the right content at the right time.   But, with just 22% of customers showing that they’re satisfied with the level of personalization they currently receive, brands need to do more to get customers to convert.   To level up your customer experience try targeting your customers beyond just their demographics. A loyalty program gives you access to deeper insights (including frequency of purchases, AOV, loyalty point balance and interactions) which will help you target your customers in new ways.  This article takes a look at how you can use loyalty data to segment your customers. It also covers strategies you can implement today to keep each of those segments engaged and repurchasing long-term. Let’s get started.  

Defining your customer segments

When it comes to loyalty, customers generally fall into three categories: the VIPs, at-risk customers and those who need winning back.  

  • VIP customers are the shoppers who fall into the top 10% of your overall customer base. Their customer lifetime value is high, they trust your brand, repeat purchase from you often and proactively tell others about their positive experiences with you
  • At-risk: these are the customers who are within 20% of your store’s lapse point. For example, if your lapse point is 100 days, any customers who have gone longer than 80 days without purchasing will fall into this criteria
  • Lost customers are the ones who have (almost) got away. They’ve passed your store’s lapse point and it probably feels like they’re gone for good. But don’t worry – we’ve got some tricks up our sleeve to bring them back from the brink...

What to do to keep each of your customer segments returning to you

Befriend your VIPs

A huge 86% of customers state that they are more likely to repurchase from a brand again if they provide an excellent customer experience. And it’s no surprise really. As humans, we gravitate towards stores that treat us like individuals – rather than just another number.   Once you’ve identified who your top customers are, you need to do all you can to make them feel appreciated and emotionally connected to you. On average, these loyal customers spend 67% more than new ones – exactly why they’re worth drawing back.  

To keep your VIPs feeling special, try incorporating loyalty tiers in your program. As your loyal customers spend and interact with your brand more, they’ll move up the tier-based system and have access to more exclusive rewards. This could be the first look at your new collections, access to free mini-products or an invite to your next brand event.   Annmarie Skin Care use their loyalty tiers to make their most loyal customers feel part of an exclusive club. Members of their “Wild & Beautiful Collective” get access to a private Facebook group and surprise gifts. As they know they will earn more perks with more engagement, the skincare brand’s customers are more likely to return and purchase.

a loyalty program showing "basic" and "insider" tiers and the various benefits associated with each

Loyalty program details for Annmarie Skincare

Attract “at-risk” customers back

For customers who are classified as “at-risk”, use email marketing to draw them back and remind them why you shopped with you in the first place.   On average, loyalty emails have a 35% higher click-through rate than regular marketing emails. Why? Because they hold more value. With loyalty data at your disposal, you can send highly-personalized and targeted emails that your “at-risk” customers will want to click.   These emails could remind these customers of the points balance they have waiting for them and the goods they could be spending them on. They could also hold prompts about the many other ways they can earn points beyond spending – such as leaving a product review or referring friends to your store.

a beauty website's rewards redemption portal, explaining to the user that they have rewards available and how to redeem them

Rewards redemption prompt for Beauty Bakerie

Win-back strategies

Just because a customer may not have purchased from you within a particular time frame doesn’t mean they’re gone for good. There are still ample opportunities to grab bring them back to our site.  

Create a campaign that either reminds these customers why they were drawn to you in the first place, or makes them feel like they’re discovering you for the first time. Show them what’s trending on your site since they last shopped with you and the loyalty points they will earn for purchasing them.   You could even surprise and delight these customers by rewarding them extra points around sale season or holiday events. Or you could run a “flash-point” event where customers can earn double the points for the money they spend and tell them about it in an email.  

With new and exciting opportunities to engage with, these customers will see the value of shopping with you over the competition. And, who knows, with a carefully executed win-back strategy, these lapsed customers could become your next loyal followers.  

Time to up your game

Customer segmentation is nothing new. It’s a fundamental part of any marketing strategy.  

What can set you apart, however, is the way you use the loyalty data available to you to target customers in new and exciting ways to encourage engagement, boost conversions and guarantee long-term loyalty  

This post was contributed by Mollie Woolnough-Rai at Loyalty Lion.  

About LoyaltyLion
LoyaltyLion is a data-driven loyalty and engagement platform trusted by thousands of ecommerce brands worldwide. Merchants use LoyaltyLion when they want a fully customised loyalty program that is proven to increase customer engagement, retention and spend. Stores using LoyaltyLion typically generate at least $15 for every $1 they spend on the platform.

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