Market segmentation, or the process of dividing a customer base into different groups based on demographics, behavior, and/or other characteristics, is arguably the most important activity an eCommerce seller can undertake. Segmentation allows sellers to target groups of customers with personalized content that encourages conversion and provides a greater return on investment than mass marketing ever could. In this article, we outline the key principles of market segmentation in eCommerce as we address the following questions:

  • How can sellers segment their customers?
  • What are the key benefits of market segmentation?
  • Why should eCommerce sellers focus on consumer behavior segmentation?
  • How does an eCommerce brand identify their different market segments by behavior?
  • What is cross-segmentation, and why should eCommerce brands be aware of it?

How can sellers segment their customers?

There are several ways to categorize market segments — some of the most common include:

  • Geography: Customers in different locations tend to have varying needs and consumer patterns. Segmentation by country, region, state, and city can inform an eCommerce brand’s marketing efforts. For example, if segmenting reveals that your business has a high concentration of customers in the Greater New York City area, then a localized digital marketing campaign focused on this particular area is likely to generate a positive return on investment, ceteris paribus.
  • Demographics: This segmentation method includes grouping customers based on identifiable non-character traits — these include socio-economic factors that influence consumer behavior such as gender, race, age, income, education level, religious views, and profession. 
  • Psychographics: People have different values and beliefs that can affect their behavior as customers. Psychographic segmentation can be influenced by geographic and demographic factors; however, the relationships between these different factors are not clear.
  • Consumer Behavior: Knowing how and why your customers make decisions is perhaps the most valuable segmentation tool for eCommerce sellers. Customers can be segmented based on behaviors like spending habits, purchasing habits, browsing habits, interactions with the brand, loyalty to brand, product ratings, etc.

What are the key benefits of market segmentation?

Market segmentation yields a number of distinct benefits:

  • More Effective Marketing: This is perhaps the clearest advantage. By recognizing different customer segments, sellers can cater their marketing to each specific group; this both improves customer experience and increases the likelihood of conversion. 
  • More Efficient Spending on Advertising: By targeting each segment individually, your marketing should yield a greater return on investment by reducing waste and heightening conversion rates.
  • Greater Customer Understanding: Collecting data points and creating market segments from them allows you to gain a clearer picture of your customers’ unique needs and wants — which, once in focus, can be specifically targeted and converted.
  • Greater Brand Focus and Differentiation: Segmentation helps you to focus on what your different customer groups like best about your brand, making it easier to lean into those traits, differentiate from your competitors, and position your products in ways that satisfy your customers.

Why should eCommerce sellers focus on consumer behavior segmentation?

As you collect data points and divide your customers into segments, you will notice that not everyone in each group behaves the same way; for example, not all thirty-year-olds behave identically, nor does everyone from Los Angeles — this is why sellers also need to segment consumers by behavior. Consider the following customer behavior segments, several of which we cover in greater detail in this article:

  • High Spenders
  • Cart Abandoners
  • Coupon Lovers
  • Thrifty Shoppers
  • One-time Buyers
  • Email Subscribers
  • Idle (Inactive) Customers
  • Curious Browsers
  • Loyal Customers

In our experience, focusing on customer behavior segments tends to yield the greatest returns on investment.

How does an eCommerce brand identify different market segments by behavior?

When segmenting based on behavior, sellers should create a choice event to help divide customers — several important choice events are already integrated into the framework of your store, such as add-to-cart, initiate checkout, and conversion.

For Example: Cart abandoners, for instance, can be readily identified (and most shopping carts do so automatically). By definition, cart abandoners do not begin their checkout process after adding a product to their cart, while non-cart abandoners at least take the step of initiating checkout (which is also tracked by most shopping carts). N.B. Even within the cart abandoners segment, further segmentation is possible. For example, on which page did they abandon their carts (billing page, shipping page, etc.)? What products did they have in their carts? Etc.

To optimize segmentation, eCommerce brands should identify which groups provide the highest return on investment, begin testing, and implement changes to improve the conversion rates and average order values of these segments.  

What is cross-segmentation and why should eCommerce brands be aware of it?

While customer segmentation creates the basis for personalization, it does not give the full picture of who your customers are at this stage. Obviously, your customers are not just forty-year-olds or only high spenders: they can be categorized in a multidimensional fashion that provides a much deeper level of understanding. For example, you can separate your male, over-40 high spenders from your female, over-40 high spenders.

Consider these principles:

  • Greater personalization and targeted marketing efforts lead to greater return on investment. 
  • There is a limit to the amount of segmentation that is worth the time and effort. If two segments respond to the same stimulus in the same manner, then consider merging them into one segment for the purpose of marketing. 
  • It is important to view market segmentation as an ongoing activity at which you and your brand will become more adept over time. 


By dividing your eCommerce customers into different segments, you can increase the efficiency of your marketing (both organic and paid), saving time, lowering costs, and leading to improved profitability. It takes time and resources, but in our experience, tends to be worth the investment.