Data-Driven E-commerce: Segmentation Strategies to Increase AOV and Conversions

Unlocking Online Revenue: The Data-Driven Approach to Customer Satisfaction

Whether online or offline, businesses aim to enhance customer satisfaction, ultimately leading to increased revenue. Identifying and addressing customer pain points is crucial in achieving this goal. In a physical retail environment, recognizing and addressing issues such as malfunctioning credit card machines or excessively long billing queues is relatively straightforward, allowing businesses to take prompt corrective action. However, in the online realm, where 98% of visitors are anonymous, pinpointing the problems they encounter becomes more challenging. Additionally, upselling and cross-selling strategies, which are more easily implemented in offline stores, require more focused efforts in the online space. 

To overcome this hurdle, online businesses adopt a data-driven approach. They collect visitor data, such as browser data and clickstream data, and assign it to individual visitors through a process known as fingerprinting. By tracking visitors across multiple sessions using probabilistic models and ID stitching techniques, businesses can identify repeating visitors and segment them based on their characteristics and behaviors. This segmentation enables businesses to observe the online behavior of visitors within each cohort and identify similarities in their browsing patterns. 

Through this approach, companies can formulate hypotheses or identify scenarios regarding the potential reasons for visitors' lack of conversion within each segment. By leveraging these insights, businesses can uncover the root causes of the problems faced by their anonymous visitors, paving the way for tailored solutions and optimized customer experiences. By addressing the segment-specific pain points and barriers to conversion, companies can enhance customer satisfaction, drive upselling and cross-selling opportunities, and ultimately increase revenue. 

The Ultimate Goal - Improving Customer Experience and Generating Revenue 

Increasing revenue depends on various factors. A low average order value or a low conversion rate can significantly impact revenue. To drive revenue growth, businesses need to focus on the following areas: 

• Increase new-to-brand conversions 

• Increasing average order value 

• Increasing Conversion Rate 

• Address barriers hindering repeat purchases 

• Implement strategies to increase customer loyalty and lifetime value 

Hence by addressing factors businesses can effectively implement customer retention and acquisition strategies, ultimately achieving sustainable revenue growth. 

Factors Hindering AOV and Repeat Purchases

Factors Influencing Low Average Order Value:

• Limited product assortment or upsell/cross-sell opportunities

• Ineffective pricing strategies or lack of bundling options

• Poor product recommendations or personalization

• Insufficient incentives or promotions

Factors Hindering Repeat Purchases from Customers:

• Unsatisfactory customer experience or poor post-purchase support

• Lack of loyalty programs or rewards

• Inadequate communication or remarketing efforts

• Product quality issues or limited product updates/releases

These factors can manifest in various scenarios, such as visitors having short session durations, or abandoned carts. Businesses must leverage their data-driven segmentation to address these issues and drive revenue growth. These pain points will, however, remain similar to visitors within a segment. Post this, they can investigate the underlying reasons or root causes behind the hypothesized scenarios and develop tailored solutions to address the identified root causes for each segment.

Visitor Segmentation: Understanding Needs Across the Spectrum

Visitors of online stores can be broadly categorized into three segments: 

• Users (2%): These returning visitors actively engage with the website, browsing categories, viewing products, or adding items to carts. Companies possess some data on these users. 

  • Customers (1%): A small portion of Users convert into Customers by completing a purchase and providing contact information. This enriches the company's data pool. 
    
    

• Anonymous Visitors (98%): Most visitors fall into this category. They browse the site but leave without purchase, potentially returning later. Recognizing and personalizing the experience for these anonymous visitors is crucial for boosting conversions. 

Each visitor segment in an online store presents distinct needs and challenges due to their varying characteristics, behaviors, and positions in the sales funnel. To effectively address these nuances, businesses must go beyond broad categorizations like anonymous visitors, users, and customers. A deeper segmentation approach is necessary. 

The primary objective is to analyze visitor behaviors, browsing patterns, and conversion funnels within each segment. This analysis allows businesses to pinpoint the root causes of issues such as low average order values (AOV) or poor conversion rates. Businesses can assign hypotheses or potential scenarios (e.g., short session duration, abandoned carts) to each sub-segment based on these insights. 

With this granular understanding, businesses can develop tailored strategies and solutions to address the unique pain points and barriers each visitor sub-segment faces. 

Visitor Segmentation: Hypotheses and Tailored Solutions

Unlocking Growth: How to Increase AOV and Conversions Across All Visitors

While specific tactics address pain points throughout the sales funnel, several universal strategies too can increase average order value (AOV) and conversion rates. These strategies aim to encourage website visitors to:

• Engage More Deeply: Increase visitor interaction with your website to foster a sense of trust and brand familiarity.

• Explore a Wider Selection: Motivate visitors to explore a broader range of products beyond their initial interest.

• Add More Items to Cart: Incentivize adding more products to the cart, ultimately boosting AOV.

• Complete Purchases: Nudge hesitant visitors towards completing their purchases and converting them into paying customers.

Limited Time Sale

Daily deals and discount

Personalized search filters

Seasonal Sale

All the above-mentioned tactics can be further personalized based on industry, for example: