How to Properly Segment Your Collection
When it comes to merchandising, are you properly segmenting your collection?
You may ask, well what exactly do you mean by “segmenting”?
Well segmenting is basically just another term for “assorting” and is essentially one of the biggest aspects of merchandising.
If you’ve followed us for a while, you may have heard us talk about pricing strategies, sales strategies and creating proper and profitable assortments. The segmenting part of merchandising is referring to the actual customers you are selling to.
For example, one of the companies I used to work for had three different customer segmentations. We had figured out that our customer base consisted of about three different customer types.
There was more of the traditional customer who was pretty much the bread and butter of our business. Then there was the sports based customer, who wore more team sports apparel and was very price sensitive. And finally our street customer, who was a bit younger, and more fashionable/trendy.
Based upon these three customer segmentations, we would create three different sku plans and make sure that we had different price point tiers within each segmentation.
Now, you may be thinking:
Well, I only have one customer type.
I don’t know exactly who my customer is.
My sales are still too small to segment my collection.
All of these reasonings are perfectly OK to have.
This is something that you’ll eventually need to do because:
A) It will help increase your sales
B) It will help with your inventory planning
So let’s break the segmenting process down into two different steps:
Determine who your core customer is.
This is the customer that you are positive about. It’s the customer that you know makes up the majority of your sales. If you are currently selling online, you should hopefully have some good analytics about this.
Or if you’re only selling wholesale, you should be able to get a good idea based upon what kind of stores/buyers are buying from you and who their customer base is.If you’re still unsure about this you need to do some investigating. Look at the other brands carried by the stores you’re selling to. Who are their customers?
Keep in mind, your core customer can be different than your TARGET customer.
For example, your target customer could be a woman aged 25-35 who likes classic styles but also follows the trends, and has a high disposable income for their age. On the flipside, your core customer (or the customer who is ACTUALLY buying the product) is much older 35+ and only buys the staple items each season.
Are you understanding the difference here?
Your main customer target market could be completely different than who your actual core customer is.
Granted, there are marketing strategies you can use to lure your target customer, but this is often a pricey strategy.
So how exactly do you try to segment your collection to both attract that target customer, while not alienating your existing or core customer?
This is where it becomes a very analytical process.
You should look at your sales by each style and start to really dig into who is actually buying each style.
Once again, if you’re already selling at the wholesale level look at which accounts are buying what and who those customers are that shop in that store.
And if you’re selling online, you should be using Google Analytics to see the customer demographics of who is buying what.
From there you can begin to get a better idea of who bought what and who your CORE customer actually is.
For example say you sell jewelry.
You sell very understated simple jewelry that is supposed to appeal to the minimalist shopper.
However, when you look at your actual sales, you realize that hoop earrings and larger styles actually do much better for you.
Could it be that the customer that resonates most with your product is actually not as minimalist as you think?
It’s perfectly fine if you still want to target minimalistic style and steer clear of the customer who has more outrageous taste, but the point is that you need to be aware of this.
You need to be aware that there are customers who may in fact like larger jewelry and that you are in fact serving that customer.
Because the bottom line is that you are trying to sell your collection and there needs to be a balance of what you’re selling for your target market and what is actually working for you.
Step 2: Determine your TARGET customer
Now your target customer is very important when segmenting your collection because this is your ultimate shopper. This is the woman or man that you are striving to attract.
This customer is usually a bit more fashion forward, trendy savvy and not as price conscious. Your goal is to appeal to this customer while providing your core customer wearable pieces that they will continue to buy.
For example (because we all know examples are awesome):
At my previous company, our target customer was a younger fashion leader who wasn’t very price conscious. The actuality of this situation was that our core customer was more traditional, price conscious and cared more about sports and their teams. While the majority of our business was from this particular customer segmentation, we still did our best to continue designing and selling styles that appealed to a younger target market while we grew that customer segmentation.
Side Note: If you already feel like your core customer is your target customer, then congrats! You’ve already achieved what most retailers and brands would consider the holy grail of customer segmentation.
Basically, when it comes to your target customer you’re going to want to ensure that you have enough product for this particular customer as well.
This may be totally confusing because you may be thinking “aren’t all of my products supposed to be targeted towards my ideal customer”. And yes, this is true. However...sometimes that doesn’t always happen.
They key is to find the balance.
Make sure that your products are resonating with both your core and target customers. They should obviously fit in together as a whole collection as well.
Once you’ve established this, you can begin to actually segment your customers into groups like some of the big guys do (for example Ralph Lauren or Calvin Klein)
But if you’ve already reached this point in your business, you’ve definitely made it pretty far in the entrepreneurial journey and probably don’t need to be taking our advice anymore!