Why your e-commerce needs segmentation

Digital channels are often the preferred — if not the only — way customers and potential customers engage with brands today. This presents a challenge. To reach prospects and customers, brands must communicate in meaningful, relevant, coherent, and connected ways across digital channels. But the challenge also brings an opportunity: scale.

If done well, brands can communicate across geographies, time zones, and even languages to huge swaths of customers and potential customers.

It’s in this context that personalization has become an essential element for today's marketers. It’s the way to ensure each person’s brand engagements stay relevant and meaningful. Personalization is increasingly important during the e-commerce journey for similar reasons. Many factors contribute to getting personalization right — a crucial one is segmentation.

In this blog, we explore why segmentation is so important for e-commerce businesses today.

The difference between segments and personas

Let’s begin by exploring a few definitions:

Segments

Segments are groups of visitors who share characteristics that allow them to be bucketed together. They can be grouped by their industry, geographies, needs, journey stage, etc.

An example would be European, male, business professionals, between 45- and 55-years-old.

Bucketing groups together enables you to create similar experiences they will benefit from.

Personas

Personas are fictional customers you’ve created based off research, customer data, or both. Different personas have different goals, communication styles, emotional needs, behaviors, customer journeys, etc.

An example might be Javier — a 47-year-old Spanish engineer who is on track to be an executive, loves cycling and cooking, and prefers written content versus video.

Teams use personas to guide the creation of user experiences and customer journeys. For users fitting the segment based on the Javier persona, you might want to offer a 500-word product description, which they can read in under 2 minutes, versus a 3-minute product video.

Defining each of the above groups will be unique to each business, depending on their business model — B2B, B2C, or B2X; whether they’re selling products, solutions, or both; where their market is — regional, national, or International; etc.

The important thing to note is that segments are ways to bucket your customers, and personas are tools that help you know how to speak to your segments, including what types of experiences and journeys they might like.

Defining each group is critical for your personalization journey.

Why segments and personas matter in today's commerce terrain

Segments and personas are important for every business. But in the currently shifting commerce terrain, they’re critical.

Perhaps the biggest commerce disruption of late is marketplaces. Marketplaces are open networks that collect and connect supply and demand while offering a seamless ordering experience — where orders can flow directly from buyers to suppliers. This definition may seem a bit abstract, but we all know what a marketplace is: Amazon.

But it isn’t just the B2C space that is transforming. The B2B space is as well. Forrester estimates that by 2027, US B2B e-commerce will reach $3 trillion and account for 24% of total US B2B sales. That’s a big shift. And it’s a shift currently occurring, with the network effects of marketplaces disrupting businesses of all types.

Network effects is the term used to highlight the fact that as the user base of a product or service grows, the use value of that product or service does as well. Simply put: more users equal more value for each.

Savvy companies are taking advantage of network effects by extending their product lines into marketplaces, like Amazon, creating their own marketplaces, like Music Go Round, and becoming marketplaces themselves, such as franchises using technology to enable franchise owners and staff to connect directly with distributors and suppliers — essentially cutting out the work of being the middle man.

While the last couple of years have seen increased scrutiny of Amazon's business practices, consumers use it for one main reason: convenience. Yes, two-day shipping is huge, but another critical aspect is curation.

Amazon can curate products and experiences (like on-demand TV viewing suggestions) for us so well because they know us. And this creates expectations in us all. We may not want to give all our money to Amazon, but until other businesses can offer us the Amazon experience, many of us will continue to do so — whether shopping for shoes for ourselves or solutions for our business.

If you’re running a marketplace, a more traditional commerce model, or a mixture of the two, your customers expect you to help them find what they need. When it comes to marketplaces, which often include 10s of millions of products and 10s of thousands of sellers, segmentation is all but required. Even with the most efficient filters, no one has the time to wade through all of that.

Personas are critical as well, as they allow you to orchestrate the kinds of journeys your segments will resonate with.

You may not care about network effects or marketplaces today. But you may need to tomorrow. Either way, getting your segmentation correct today will support you whenever and however your business grows in the future.

But isn’t it all about the segment of 1?

Marketers and marketing publications today talk about traditional segmentation being a thing of the past. The assumption being that it’s about the segment of 1. And this is true — up to a point.

Sitecore Discover, for example, does enable you to engage site users as a segment of 1. Take, for example, a visitor searching for “shorts” on a site running Sitecore Discover. They may see men’s shorts initially due to their prior history and the product category’s trending popularity.

However, if this same person starts typing “women’s shorts,” Sitecore Discover’s AI quickly pivots on gender and tunes the experience to reflect the purchase intent of the visitor in real-time. As the shopper continues to click, Sitecore Discover further refines recommendation and search results.

While this might seem simple enough, the truth is it requires incredibly sophisticated AI, as can be seen by considering the algorithms that go into making experiences like this possible:

 

And here’s another truth: other competing personalization vendors completely lack this ability to understand purchase intent on-the-fly at the individual level because they lack Sitecore Discover’s proprietary AI algorithms and architecture.

But even with Sitecore Discover working on your commerce site, segments are still necessary for orchestrating journeys beyond it. Most customer journeys today are cross channel, and segments are the best way to ensure these journeys stay connected and relevant. The goal is the 1-to-1 personalization across channels. But we're not there yet. . Whether we’re talking about the world of today or the omnichannel, 1-to-1 personalization of tomorrow, cross-channel data collection, orchestration, and activation is essential.

This brings us to the CDP.

CDPs for commerce segmentation

Customer data platforms typically have four functions. They (1) collect data on every click, action, search, and conversion from both known and anonymous customers. They then (2) consolidate and connect this data in one place — creating a unified profile for each customer.

At the same time, this data is also used to (3) create and refine segments. They then (4) activate the data by connecting the correct profiles to the proper segments and triggering personalized experiences that match. Some CDPs use machine learning to support segmentation. Others (such as Sitecore CDP) can even do it in real time.

By combining a CDP with an intelligent commerce platform, such as Sitecore OrderCloud using Sitecore Discover, you can achieve 1-to-1 personalization on site and personalized journeys that approach 1-to-1 across channels.

We create composable commerce solutions so businesses can get the solutions they need today, with the capacity to easily become the solutions they need tomorrow. Whether you’re ready to implement omnichannel personalization across a B2X business model or just looking for a smarter, more flexible platform for B2B transactions or something else entirely — whatever your commerce needs, we have you covered.

Get ahead of the commerce curve. Learn more about Sitecore Commerce.