Customer Segmentation

Introduction to Customer Segmentation

In this article we present a case study, based on the Travel Industry, which explains the 123’s of audience segmentation for purposes of managing website traffic. In other words, how to offer relevant choices to your audience based on market segmentation.

Using the example of a travel website or budget airline travel, this article explains why customer segmentation is needed, in order to make sure website visitors are seeing relevant content. Specifically, with target audience segments, it is possible to structure cross-sell products and services. This essentially amounts to building an interactive marketing plan which offers visitors value-added purchase options.

Definitions and Goals

Customer classification / segmentation analytics

The technique is to define a statistics which will help you to understand your clients better – and offer then a valuable service. This process is also referred to as Market Segmentation or Behavioral Segmentation.

Cross-selling is the practice of selling (additional) products and services to an audience segment based on current or past purchases. The goal is to increase the revenue generated per customer.

Market segmentation is the practice of dividing a user population on the basis of behavioral characteristics, such as how they click, login or not, and what they purchase.

Introduction: travel websites

How to create a marketing plan based on audience segments and cross-selling: Case Study for a travel site. To begin with, in terms of traffic management, the main challenges are customer maintenance and acquisition. The goal is to keep the existing customer base loyal with a robust, interactive, user-friendly interface.

Typical elements of a Travel website or low-budget airline:

• Maintaining traffic and ability to support multiple users at one time, in order to avoid site crashes due to overload –  a common occurrence on travel sites when Fare Specials are announced. For example, Air New Zealand announced ‘600 flights for 600 Dollars’ in October of 2017 – the site was overwhelmed and completely crashed.
• Introductory and promotional offers for combination deals, for example, when you book a flight and a hotel together; a discounted price as opposed to only booking a flight or hotel.
• Offer a wide range of accepted payment methods.
• Introduce membership benefits, points, or miles, for example points gained in return for money spent on the site. Additionally, extra points on inviting someone to use the site or someone you refer uses the services on the site.
• Responsive customer support.
• Maintenance of customer base, attract your recipients with new and existing offers. Budget airlines such as Southwest Airlines. jetBlue, Easyjet, Transavia, and Ryanair mail their lists as frequently as several times per week.
• Increase the amount of incoming customers. Travel websites receive a large amount of traffic based on SEO. The challenge in order to maintain growth and competitiveness is the need to increase incoming (new) users to the site.  The visitors need to convert at a minimum percentage, in order to generate revenue. Customer acquisition and maintenance therefore become key focus.
• App for download which is used to send travel alerts and promotional offers

Background – initial audience segmentation based on behavior

A typical travel site may offer domestic and international flight bookings, hotel, car rental, and train and cab bookings. There are numerous types of customer profiles to be catered to. Each segment has distinct needs, for example, Business versus Holiday travelers, meaning different cross-selling opportunities.

Have you tried to check-out through an airline travel site recently? After selecting your ticket, you and look for the check-out button, you may notice that you have to click your way through offers to upgrade your seating, offset your carbon, pay for hold luggage, rent a car or hotel, rent skis, and least but not least, insure your trip. If these were random products you might start to get annoyed, but chances are, you may actually need one or more of these items. The point is, if you are going to cross-sell – make sure you offer relevant products & services.

Examples of customer segments without mention of the products they may purchase, based on visit history:

1. first-time users who have created an account on the travel site,
2. returning users who have an account,
3. users who have been customers in the long term and travel excessively etc.

Relevant Content Based on Segmentation

The challenges in meeting our customer-segment needs faced here range from being able to build a strong customer base through to providing discounts and knowledgeable insights, ie, when a specific airline has promotion-discount offers running, or algorithms which collect information about the cheapest flights based on travel alerts and saved-searches. Bottom-line: maintain customer satisfaction by providing useful insights on a regular basis through a variety of channels – email alerts, site banners, tweets, etc.

The Solution – Example Segments

The solution to this issue is the creation of customer segments. Segmentation means dividing traffic into customer subsets based on engagement tracking and purchase histories. Customer are individually segmented into one of several groups based on parameters such as client type.

• Client type (ie. business, or loyalty club member)
• Logins versus “anonymous”
• Frequency of purchases (yearly, monthly)
• Customers using the website for single products; flights, or hotel bookings, car rentals, etc
• Holiday packages
• City trips, Conferences, Trip organizers (Resellers, travel agents)
• Entering from specific traffic campaign, newsletter, or affiliate network

Each of these customers need to be handled separately as a segment. This is a much more efficient solution than handling them individually, which is realistically not even possible. The challenge is to make sure you only provide information (marketing, fare specials, discounts) which is irrelevant, and avoid damaging loyalty you may have created in your customers. People open promotional emails because they expect to feel good, which means be rewarded for their effort.

Upselling, or value-added products and services

A user books her flight ticket to her chosen destination. Upsell the idea of booking a rental car at the same time, or offer a promotional item such as a water bottle or travel wallet if additional services are booked. People tend to love free stuff! Another user is a registered customer – offer 2-for-1 air miles. A user booking a train ticket has a different profile from the user booking a flight tickets. The suggestions and the recommendations showcased to the flight user id not relevant to the railway user. This is an example of when segmentation is required. International travels may have different needs than domestic travelers. Income level is another determinant of spending power, and travel spending patterns.

A user who is booking a flight may also be interested in making hotel or cab bookings at her destination. Cross-sell these options to customers by examining the behaviour and profile of the user. A travel site may also offer holiday packages let visitors know that they have these possibilities to choose from.