Why it is Important to Segment Your User

As Avinash Kaushik put it greatly: "All data in aggregate is crap"

And we couldn't agree more. Actually, Air360 user segmentation is not just a product feature, it's at the center of everything you can do.

So why should you always segment your users?

The ultimate goal of Air360 is to help you reach higher conversion rates by improving your website or app experience. This requires having a clear understanding of how your users are using your website or app. Let's take a concrete example that will show you it's critical to segment users.

Example

Checking a conversion rate or a bounce rate for all your users is misleading: It blends data from users who are discovering your website for the first time with returning users.

Returning users are prone to survivorship bias : Survivorship bias or survival bias is the logical error of concentrating on the people or things that made it past some selection process and overlooking those that did not, typically because of their lack of visibility. This can lead to false conclusions in several different ways. It is a form of selection bias.

If we want to make sure our website is easy to use, it's a wise choice to base our analysis on new users (the people who don't know anything about your website yet!).

Metrics blending new users and returning users are simply meaningless: Your return visitors are by definition, already familiar with your website. As a result, they're likely to have lower bounce rates, spend more time on site, have higher conversion rates. So when thinking about how to improve your site experience, you may want to focus on improving the user experience for your new visitors only so you can see if your user experience make new visitors feel comfortable and come again.

Example #2

An another example: Which one of the insights below looks the most actionable?

Insight #1: Know that 3% of your visitors purchase from you

Insight #2: Have the same metric split among these user segments:

  • Browsed handbags products: 1% purchase from you
  • Browsed swimwear products: 3% purchase from you
  • Came from one of your tweet : 8% purchase from you
  • Have read at least 5 blog posts from your blog : 12% purchase from you

Did I make a point here? Not only these metrics are much more useful and actionable, but they can also give powerful results when we act upon them. It is no secret anymore that segmented campaigns perform much better.

For example, according to DMA, marketers have found a 760% increase in email revenue from segmented campaigns. This makes perfect sense: The more relevant the message, the more likely your subscriber is to act on it.

Not convinced yet?

Here are 6 facts that will convince you of the power of user segmentation when it's done right.

  1. Based on a study of 33 billion visits to 180 different ecommerce websites, it was found that returning and repeat customers make up just 8% of visitors, but deliver 40 percent of revenues.
    What it means for you: A 2% increase in return shoppers would deliver a 10% increase in revenue.
  2. The probability of selling to an existing customer is 60-70%, while the probability of selling to a new prospect is 5-20%.
    What it means for you: If you want to boost your sales, your best bet is to focus your efforts on retaining your customers.
  3. First time buyers are worth up to at least 10 times as much as their first purchase.
    Think of the number of friends you referred to your favorite clothing brand or all the money you spent at Starbucks! Any business can benefit from repeating orders, upselling and referrals.
    What it means for you: The orders you get are not the metric you should care for. The ultimate goal is to keep your customers connected to your brand after their first purchase. If you're great at selling but fail at keeping customers around, you're missing potential revenue.
  4. It is 7 times more expensive to acquire a new customer than to keep an old one. If you are familiar with the budget and efforts it usually takes to acquire new customers, this should ring a bell.
    What it means for you: Rethink how you prioritize your budget between customer acquisition and customer retention.
  5. The more personal the customer experience is, the more the average sale is.
    The reason behind this is simple: As humans, we all enjoy to feel we are understood & considered as humans, not treated as statistics or walking credit cards.
    What it means for you: With Air360, it is quite common our customers see a +40% in money spent by their customer just by applying a few simple principles.
  6. In most businesses, 20% customers contribute to 80% of your total revenue.
    People who spent once are more likely to spend again. People who make big ticket purchases are more likely to repeat them.
    What it means for you: If you can identify these top 20% customers and focus your efforts on them, you'll always be safe.

Key takeaway: Considering your customers as a single group is leading to lost revenue opportunities. If you are able to segment properly your user and create an experience that each of these segments, the opportunity for your business is HUGE.

If you're convinced, it's now time to see how to segment users in Air360