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3 Steps For Retailers To Improve Customer Segmentation

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Customer segmentation may provide the needed push for retailers to start taking action on the gold mine of customer data collected by loyalty programs. By grouping customers according to demographics, income, gender and other segments, retailers can improve their marketing efforts to target individuals that maximize overall sales.

For mid-market retailers looking to take advantage of the benefits of customer segmentation, here’s a three-step approach to getting started.

  1. Collect basic customer data: Mid-market retailers just getting started in gathering customer data may not have enough information to create customer segments. To begin, retailers should capture basic information about their customers, such as gender, age range and zip code. All of this information can be gathered by a sales associate at the point-of-sale (POS) register. While the collected data won’t be attached to a specific person or customer, retailers can still analyze their customer demographics to create customer segments.

    For example, say you’re an apparel retailer and discover through data entered into a POS register that female shoppers make up 85 percent of sweater sales. Based on that data, you might decide to target a sweater sale toward female customers, and push those types of promotions to women in your loyalty member program.

    Most ERP systems prompt retailers to input basic customer information such as name and address. To capture more specific customer data, you’ll likely need to input the type of data you’re looking for the solution to track.

  2. Define the process for customer data collection: You’ll want to implement the most effective process for your employees to collect customer data. That depends on how much time your sales associates are realistically able to spend with customers on a transaction or sales process to gather information.

    For example, a high-end men’s suit retailer would want to know as much detail about its customers as possible. To gather that data it makes sense to link each sales transaction with the customer. In that case, you could configure your POS registers to ring up a sale only when a customer’s information is entered into the system. Clients at a high-end boutique likely don’t mind sharing personal customer data in return for attentive customer service, such as receiving advice on the latest fashion trend or getting measurements for a custom suit.

    On the other hand, customers at a grocery store are more likely to value convenience and speed. In that case, it makes more sense to offer customers a keychain loyalty card so store associates at the register are able to quickly scan it at the register. While the loyalty card may not initially reveal a deep amount of personal information about the customer, the card should be able to track the customer’s purchase history, which is still helpful in creating customer segments. As you design ways to capture deeper demographics regarding the loyalty card holder, then it can become an immediate “analytical” benefit, since that member’s purchase history has already been captured.

  3. Use a retail ERP solution: With a retail ERP solution, you’ll be in a better position to define customer segments that help to drive up sales. It’s designed to do the heavy lifting in identifying such segments for specific goals or pinpointing target customer groups. Customer segments could include customer demographics, geography, income and much more.

    Since ERP solutions offer a broad range of functions, you have the power to tailor the solution to your specific needs. A retail ERP solution also provides you with the flexibility to adjust customer segments in order to maximize profits.

Customer segmentation allows retailers to dig below the surface of the data collected through loyalty programs and a POS register. The three-step approach outlined here should help you to set up a data collection process that defines customer segments, leading to more targeted marketing efforts and increased sales.

Author: Wm. Matthew Street, Solutions Consultant/Retail Product Lead at ArcherPoint

To learn more about customer segmentation, schedule a demo of ArcherPoint's Retail Management Solutions.