Are you currently offering only one type of eCommerce shipping, such as economy 3-7 day shipping or 2-day free shipping? If so, it’s time to reevaluate! There’s a high likelihood that you’re losing customers and operating an inefficient shipping operation. So, how can you create an ideal mix of shipping options that cater to your customers’ needs while remaining profitable? In this article, I will guide you through a five-step approach to analyzing your customer demographics. By conducting this analysis, you can implement the most effective delivery and curbside pickup options that address your customers’ preferences while maintaining profitability.
What Is And Why A Market Segment Analysis? If you haven’t already, performing a market segment analysis is crucial for identifying the ideal shipping options for your customers. This essential task ensures your eCommerce business thrives. In fact, the process is similar to any other market segmentation analysis you would conduct for your products or services. Familiarity with key customer demographics such as age groups, locations, and income levels is vital. By understanding their unique preferences in delivery speed and convenience, you can cater to their needs more effectively. Without further delay, let me guide you through a 5-step process to determine the best delivery and curbside pickup options for your business.
1. Align Your Shipping Options With Your Business Goals.
Before embarking on optimizing your eCommerce shipping options, it’s crucial to establish clear and specific business goals. For example, are you looking to optimize your delivery options to increase customer satisfaction, decrease shipping costs, or to reach a wider market?
Also, a key reason to optimize your delivery options is to prioritize high-value customer segments. Specifically, these customers have a high customer lifetime value (CLV) or are part of a market segment with a high growth potential.
By knowing your delivery options objective, you can efficiently allocate resources and tailor your approach to fulfill these objectives. Also, setting measurable, time-bound goals will also help in tracking progress and adjusting the strategy as needed.
2. Gather Customer Delivery Experience Data.
The next step in optimizing your eCommerce delivery options is gathering comprehensive user data. This information can be collected from web analytics, customer surveys, or historical purchase data. By analyzing this data, you’ll gain valuable insights into customers’ preferences and requirements. For example, from your data analysis, you can determine preferred delivery speed, cost expectations, and geographic location. As a result, you will better understand and cater to the diverse needs of your customers in a cost-effective manner.
3. Identify Key User Segments For Each Shipping Option.
Once you’ve gathered sufficient data, it’s time to break down the information into distinct user segments. One way to segment your customers is by delivery speed. For example, most eCommerce businesses will have a customer segment who desire 2-day free delivery. Further, you can identify these segments by demographics (e.g., age or income), geographic regions, or specific customer behaviors (e.g., frequent online shoppers versus occasional shoppers). The full range of eCommerce shipping options you can offer are as follows:
eCommerce Shipping Options
- 2-Day Free Shipping
- Same-Day Shipping
- Curbside Pickup Option
- Economy 3-7 Day Shipping
- Expedited Shipping – Faster Than Economy
- Expedited Shipping – Faster Than Economy
- Overnight Shipping.
- International Shipping
- Eco-Friendly Shipping
- Freight Appointment Shipping
For a more detailed explanation of these eCommerce delivery options, see my article, Advice On The Right eCommerce Delivery Speed Options That Will Make Your Customers Rave. Here you will get a full understanding of customer shipping options expectations. In particular, you will get insights on how the world of eCommerce deliveries is evolving. You will find that just offering one type of shipping such as 2-day free shipping is not optimal for your business. Further, the “one-size-fits-all” approach to eCommerce deliveries has distinct disadvantages. Also, you will find examples of why customers choose one eCommerce delivery type over another.
Now, if you have a good understanding of your shipping options, next you need to Identify key user segments. This will allow you to develop targeted strategies for various customer groups. Indeed, this will ensure that you match each of your customers with the best delivery options for them. Below are examples of segmentation that you can use to match up customer groups by shipping options.
Ways To Identify Your Customers By User Segments.
a. Demographic Segmentation.
Here you identify your customers by age, gender, income, education, and marital status. For example, you may find you have a lot of high income customers who are willing to pay for expedited or same-day shipping.
b. Geographic Segmentation.
This includes the country, state, city, and town. For example, you discover that you have a lot of customers in dense, urban areas where they prefer free 1-day delivery. Moreover, you find the 1-day shipping costs are affordable in selected metro areas.
c. Psychographic Segmentation.
This can include personality, attitude, values, and interests. For example, you have a large customer base who value a sustainable lifestyle and they are willing to pay for it. Thus, you can offer shipping from a parcel carrier that offers a carbon-neutral service.
d. Behavioral Segmentation.
Here you identify customers with unique tendencies, frequent actions, product use, or habits. For example, you may find that you have a large customer base that desires free 1-day shipping. Moreover, they are more than willing to increase the order size to $50 or more to get expedited shipping.
e. Needs-Based Segmentation.
This can include product or service must-haves and needs for specific customer groups. For example, you may have a large segment of business customers who need reliable overnight shipping for select products. Moreover, they are willing to pay for it.
f. Economic Value-Based Segmentation.
Here you identify a large customer base who value a good deal. For example, you find you have a large customer base who will buy in bulk and opt for curbside pickup if the price is right.
These methods of market segmentation listed above are just a few examples. Each eCommerce business has their own unique sets of customers or potential customers that they would like to target. Also, this customer analysis should be a periodic process. This is because eCommerce customers’ delivery preferences are constantly changing and the competitive landscape is evolving. To explore more information on market segmentation, see Purchasely’s User Segmentation, Hubspot’s Customer Segmentation, and ACRS White Paper: The delivery experience segmenting consumers.
4. Prioritize User Segments And Associated Shipping Options.
After identifying key user segments, prioritize them based on factors such as their size, profitability potential, and alignment with your business goals. Focusing on the most important user segments will help you allocate resources effectively and maximize returns on investment. Be sure to consider both short-term gains and long-term potential when prioritizing user segments. For example, you might prioritize high-value customer segments with a high customer lifetime value (CLV) or segments with a high growth potential.
5. Develop Tailored Shipping Options Strategy And Implement.
With a clear understanding of your priority user segments, develop a tailored delivery options strategy that caters specifically to the needs and preferences of each group. This may involve offering different types of delivery services (e.g., same-day delivery for time-sensitive customers). Or adjusting pricing strategies (e.g., offering free shipping for high-order-value customers). Or another strategy would include providing unique promotions tailored to specific user segments. By focusing on the preferences of your key user segments, you can optimize your eCommerce delivery strategy and ultimately improve overall customer satisfaction and loyalty.
Now, that you have identified your optimal delivery and curbside pickup strategy, you need to implement. For implementation, you need to look at your current systems, people, and processes. In most cases, you should at least consider a 3rd Party Logistics (3PL) provider that has the expertise and experience in customer order fulfillment services in your industry.
Also, effectively providing multiple delivery options is a complex process that you need to execute flawlessly. Even if you have the capabilities to offer these services, it is a good idea to evaluate 3PLs to compare costs and services. This “buy-or-build” approach will assure you have the best and most cost effective solution for your customers. Also, there are countless 3PL providers out there. Focus on the 3PLs that can best partner with you to meet your specific delivery options strategy. For more information on how best to work with a 3PL, see my article’ What Is A 3PL? Compare Types, Capabilities, Tech, Best Value.
For a more detailed explanation on conducting an user segment analysis, see Purchasely’s User Segmentation.
For more information from Supply Chain Tech Insights, see articles on eCommerce.
Greetings! As an independent supply chain tech expert with 30+ years of hands-on experience, I take great pleasure in providing actionable insights to logistics leaders. My background includes implementing 100s of innovative solutions using emerging technologies and a data-centric development approach. I have also provided business intelligence (BI) solutions for 1,000s of shippers. For more about me, click here.