5 tips for a good product segmentation on your online store

This is Sosign very 1st Blog post.

Product segmentation is the number one factor that makes your visitors decide either to pursue their shopping on your site or leave to another site. A good product segmentation is therefore very important and should be the first optimization you may consider to perform on your online store. The persuasion process of your visitors happens in a matter of seconds if not milliseconds, so it is also very important that your segmentation be easy to understand. Here are five tips to help create a successful segmentation for eCommerce.

#1 Use your customer’s perspective

Your customers are your best advisers for product segmentation. Ask your customers, after they buy your products, the purpose for which they bought each product. This will help you define trends and adjust your segmentation accordingly. This will also help you reorder products in the right categories. If for some reason you cannot question your customers directly, use common sense and put yourself in your customers’ shoes. Ask yourself “in what situation would I need this?”. Your intuition should be able to tell you not only why people would need a product but also what situation they are facing at the time of purchase; need a dress for a party, need a specific utensil for a new recipe, need a gift for a nephew, etc. What is important is that your category names make sense to prospective shoppers and that the products listed are really relevant to each category.

Example: an online pet store would tend to sort products by animals. Cats, Dogs, Rats and so on. An optimized segmentation would look more like this: Food, Toys, Collars, Dog clothes and Cats Only.

#2 Choose your niche

The more specialized your online store is, the higher conversion rate you can expect. It is not surprising that sites with top conversion-rates include: flower shops, book stores or baby item stores. If you run an offline hardware store and you are considering eCommerce, you will be far more successful opening a Rare Screws-site than a general online Hardware store. It is always better to sell fewer products at the beginning and grow your offer vertically depending on demand rather than selling a large number of products right away and have to make difficult choices about which products to remove afterwards. The story of diapers.com is a relevant example. The site started by selling diapers online and the first few years allowed the company to grow its customer base and become known as the online stop for diapers. Once its reputation grew and its customers’ loyaly was well established, it started selling car seats, strollers and toys thereby enlarging its offer and growing the business to an online supermarket for all sorts of baby products.

#3 Avoid large segments when beginning

If you are just starting eCommerce, it is generally a bad idea to offer a wide range of products, unless your name is Wallmart and you know that from day 1, you will already have a substantial customer base that already knows your products and are therefore likely to buy products that they have been used to buying offline. Avoid sectioning your products in categories such as Tools, Furniture, Outdoor, etc.. Instead, consider smaller segments such as: Home repairs, Baking, Gardening and so on. If you have a lot of SKUs, no need to sell all of your products right away, you can start with only your best sellers.

#4 Identify your products that sell the best

Identifying your best sellers and highlighting these products on your site are logical things to do. If you display those products that sell the least on your homepage, then you have a good chance of losing a lot of customers (high bounce rate) because they are not attracted by the general perception that they get from your products. Divide you products into three tiers according to their popularity.

Exemple: as a test (A/B test is low-risk), try promoting only your Tier 1 products by default on your homepage and in the first position among your categories. Your Tier 2 products could be used as product recommendations at the bottom of the Tier 1 products page. And, your Tier 3 could be used as related products automatically added to the bottom of your order confirmation emails.

#5 Learn from offline retail

From my personal experience, online retail experts have a tendency to be a bit snobbish towards anything that has to do with traditional retail. This is a misguided attitude. Despite appearances, offline retail is far more mature and sophisticated and has a lot to teach us online retail experts. Don’t forget that it has a much longer history. Taking examples from a domain that has been around for more than 80 years, (compared to 15 years for e-tail?), is an intelligent thing to do and will serve you well. When working on production segmentation, in-store product categorization is a good strategy to follow.

Some standards of offline retail are now considered as worldwide references for product categorization. Whether you go to a store in Portsmouth, Ohio or a store in Barcelona, Spain, you will find the gum at the cash.This is one good example of a standard that has become so common that it has been adopted worldwide.