Our app Loyal divides your customer base into 6 groups that can be approached differently based on their shopping behavior. The app uses the RFM method of customer segmentation: it takes into account recency, frequency, and monetary value of purchases.
In this post, we’re going to outline the best strategies applicable to each customer segment created by Loyal.
RFM-based customer groups in the Loyal app
Before we dive in, how can you apply segmentation insights in your marketing and sales activities? The biggest outcome is the personalization of communication with customers that you handle via emails, SMSs, and other channels.
Besides that, information on segment distribution can help you analyze the flow of new customers (if it’s not stable enough, you might need to double down on attribution) and the growth dynamics of your most loyal customers (if you tend to lose people in this segment, you might want to rethink your loyalty offers).
This is just a peek at what you can achieve with customer segments automatically gathered and regularly analyzed.
For now, let’s break down the 6 groups created by the Loyal app:
New (those who have recently placed an order),
About to Sleep (those who haven’t made any recent orders),
Sleepers (those who haven’t purchased anything for a long time),
Potential Loyal (those who have made several orders but are not yet dedicated to your store),
Loyal (your star customers who make regular orders with the value above average),
and Loyal at Risk (those who have been loyal but then stopped making regular orders).
How does Loyal build customer segments?
The app uses customer and order data from up to the last 10 years (for those orders that have a customer ID, haven’t been canceled, and are fully or partially paid). It calculates all store’s data (total value of each customer’s orders, number of orders, and number of days from the last order) and then normalizes it and runs through a learning algorithm (K-means clustering) to identify similar properties that qualify for a particular score-based group. The score ranges from 111 to 555 (1 to 5 for each criterion: recency, frequency, and monetary value).
There’s no fixed number of days passed from the last order that would qualify for a certain customer segment, as there are no universal metric values that can be applied to all stores. Everything depends on your specific order data. It’s only logical: for instance, subscription-based businesses will have a higher number of orders to qualify for loyal customers.
❗ To get a hyper-segmented view of your customer base, you can analyze other e-commerce metrics such as AOV and CTLV.
Let’s explore how you can approach each of the customer groups in the most profitable way.
How to welcome new customers
This group represents your first-time buyers that have recently made an order. You can create a small sequence of welcome emails that will serve a variety of purposes:
- Confirming and summarizing the order. It’s important to give a snapshot of the completed order so that a customer can review it and make sure they haven’t made any mistakes (wrong product quantity or an error in the address).
- Informing about delivery dates and tracking. Fast and convenient deliveries top the list of demands of modern customers so don’t hesitate to inform your new buyers about the shipping carrier, delivery timeframe, and other details.
- Collecting feedback. If you have automation in place that can trigger an email after the order is delivered, use such an email to ask for feedback. To encourage product reviews, offer a discount code in exchange.
- Encouraging next orders. Provide a discount for the next purchase and make the deal limited in time. This is also where you can promote your best-sellers or remind customers about some unique qualities of your products.
- Upselling and cross-selling. Even when a customer has already finished the ordering process, you can motivate them to add more items to that order by offering relevant upsells or cross-sells.
- Building a loyalty program. You can encourage new customers to take part in your loyalty or referral program.
❗ Some Shopify apps for affiliate marketing will help you build a referral program.
- Promoting your brand image. Add links to your social media, the latest blog posts, or anything else that might solidify the interest in your brand and products.
- Speaking about your values. If your store has a narrow focus built around certain values, don’t miss an opportunity to remind customers about them.
- Helping resolve issues. Tell a customer how they can contact you if they have any questions about the order or anything else.
- Building connection. When you thank a new customer for their purchase and offer them a good deal, you’re starting to build a relationship that can last long. There are a lot of factors related to products and competition that will turn shoppers into loyal customers, but fun and informative emails can also contribute to that.
❗ It’s been estimated that a series of welcome emails brings 51% more revenue than a single email. Create a logical sequence that will make shoppers more familiar with your store and the perks they might get.
How to reactivate about-to-sleep customers
This is the group of shoppers who haven’t made new orders. Typically, the segment is populated by those customers marked as New before who haven’t made the second order.
You can bring back their interest when they still remember their last purchase—by asking for feedback on products and delivery. Apart from checking on the status of the last order, you can do the following:
- Remind customers about the unique value you’re offering.
- Encourage customers to share a review for a coupon in return.
- Ask customers to create their photo or video content and tag you on social media.
- Offer a time-limited discount for the next order.
Some businesses create discounts for each month, trying to stick around until a customer makes a new order.
- Give a free gift or an opportunity to gift a product to a friend.
- Send out news about new products and their benefits.
- Tell them about the perks of referral and loyalty programs.
Speaking of loyalty programs, here are some tips:
- Create multiple tiers that will give higher benefits for a bigger spend.
- Assign loyalty points for a variety of actions: registration, app install, referral, tag on social media, each order, etc.
- Constantly educate customers about your rewards. Have a dedicated page on your website and send email sequences about your loyalty perks.
- Gamify your loyalty program. The more fun it is to earn points and gifts, the more likely customers will join. There are loyalty management platforms like Antavo that will help you integrate gamification elements like badges, quizzes, and contests.
How to spur interest among sleeping customers
Sleepers are those customers who haven’t placed any orders in a while. This group is usually the biggest, and it’s okay for e-commerce businesses, especially those that sell products that are not in regular use. Your job here is to offer something almost irresistible—say, a significant discount.
With this segment, it’s better to send only one offer and not use the same promotion over and over again, reminding customers of your existence. However, you can use this segment once again when sending Black Friday or holiday campaigns.
Don’t overestimate communication channels different from email: you can send out discounts via SMSs or even call sleeping customers to offer them something unique and ask about their concerns.
Besides a discount deal, you can check on customers’ last order to offer relevant additions to it or helpful instructions for using purchased items.
How to approach potentially loyal customers
The Potential Loyal group consists of those who have made multiple purchases. They can either get “promoted” to loyal customers or turn into sleepers. What you can do to motivate them to buy more from your store:
- Offer free shipping. As many as 41% of consumers consider free delivery as a top decision-making factor. Also, you can offer no-questions-asked returns or other perks related to customer service.
- Inform (or remind) them of the advantages of your referral or loyalty program.
- Provide them with early access to new products or sales events. You can also send out free samples or exclusive access to digital items if you have any.
- Offer shoppers an opportunity to try out several models before buying. If this idea fits the type of products you’re selling, it can be a great conversion booster. For instance, the glasses brand Warby Parker features a free home try-on: customers get 5 pairs of glasses delivered to them for free before they make a decision. They were pioneers in offering such an experience, which turned out to be so successful that other brands like Allbirds joined the trend.
- Partner with other brands to offer more relevant goods and perks. Successful examples speak volumes: collaboration between a nutrition supplement brand Myprotein and a food subscription service SimplyCook brought £150,000 in commission for the former and 56,000 clicks for the latter.
How to keep your loyal customers engaged
This group represents your best customers whose order frequency and value are greater than average. These people probably already love your store so there’s no need to persuade them of the benefits of your products or offer them a huge discount.
❗ Discount offers for the most loyal customers are actually a controversial topic. There’s an opinion that companies should, in fact, offer the biggest discounts to the most profitable customers. If you think this might work, go heavy on discounts for your loyal shoppers. At the end of the day, it should be your top priority to keep them satisfied.
What can be your move with loyal customers is providing something exclusive: early access to the newest arrivals, additional services like no-questions-asked refunds, personal thank-you notes, invitations to create content with your products and get featured on your site and social media, etc. The list of options is endless—get creative and show the most loyal shoppers that you have something for them on top of just great products.
You can turn your loyal customers into brand ambassadors. If they buy your products quite often, they can probably share interesting content about those products in real-life use. If you’re collaborating with influencers to promote your brand, loyal shoppers might even do a greater job because they already care about your products.
Apart from offering something for loyal customers themselves, you can help them take care of someone else—giving an opportunity to gift a friend with your product or service can be a great idea. It’s widely used in the niche of digital businesses like streaming platforms, but the concept can be applied to physical products as well.
How to gain back the trust of loyal-at-risk customers
These customers have been active but stopped making orders on your store. To reactivate them, you should get a hyper-personalized approach: analyze each individual buying behavior to offer relevant products. You can also ask for a review and offer a discount in exchange. When requesting feedback, you can directly ask about what can be improved so that customers turn to your store instead of your competition.
There are different ways to craft a message to an almost lost customer. A study conducted by B2B DecisionLabs and Corporate Visions shows that messages that focus on why a customer should switch back to a business they were formerly loyal to get the most replies and actions.
You can tell about your most recent positive changes: for instance, you might have changed a fulfillment partner and now feature more convenient delivery and pick-up options. Or, you improved your product(s)—it’s especially helpful to inform shoppers about that if you have some specific complaints which you successfully addressed.
Keep all your customers engaged
Before you craft offers for different segments, check out what your competitors are doing. It might be that shoppers prefer another store over yours only because it has a loyalty program: explore it and think about what you can do better. Maybe, there’s some customer need that you can meet that other businesses haven’t yet covered?
Apart from personalized messages based on shopping behavior, some campaigns might work well with any customer group—for example, emails that notify people about holiday gifts.
Year recap emails that contain your achievements, news, and fun user-generated content can also be interesting for any customer, even those who haven’t made any orders.
While apps like Loyal will do some heavy lifting for you, you still need to dig deep into each created customer segment to build effective personalized communication. Your most important tool here is email marketing: besides crafting the perfect message and offer, make sure your emails are neatly designed and mobile-friendly.
❗ You can experiment with the time to send out emails. Omnisend’s research shows that the beginning of the month shows the best results; Thursday performs better than other days; 8 am has the highest open rates while 5 pm has the highest click rates.