7 Easy and Effective Customer Segments to Target in Facebook Ads

7 Easy and Effective Customer Segments to Target in Facebook Ads

Facebook ads, when utilized properly, are among the most effective targeted marketing efforts in the industry.

However, it’s often the case that companies are leaving money on the table when it comes to Facebook ads. Often, there are simple customer segments (that you already have access to) that you can target with Facebook Ads very effectively.

Facebook’s Increasing Competition (and Opportunity)

Facebook is, by far, the most promising social advertising platform for E-Commerce purposes — the site has 1.86B users, an average ROI on targeted ads of 152%, and is responsible for 85% of all social media e-commerce.

A customer survey conducted by BigCommerce revealed that 51% of SMBs expect social advertising channels (specifically Facebook Ads) will play a major role in accelerating revenue throughout 2017 and beyond.

Facebook is becoming more popular by the day. Their ad platform is becoming more competitive as a result. In April of 2017, Facebook announced that there were more than 5 million active advertisers using their ad platform. A year earlier, they had almost half that, with 3 million advertisers.

Facebook ads are based on an ad auction system, so increased competition drives the cost of using the platform up. According to the Nanigans Facebook Advertising Benchmarks Report, there’s been a 92% year over year CPM increase for the ECommerce vertical.

To combat rising competition and prices, you need to get savvy about your ad targeting and delivery. This article will outline some of the lowest hanging fruit in terms of audience targeting.

Why Facebook Custom Audiences Is The First Step

On the surface, Facebook campaigns have 3 components:

  1. Audiences. How you target your potential buyers effectively.
  2. Ads. Offer a message that speaks directly to each audience.
  3. Landing Pages. The target destination for your leads.
3 components of Facebook Campaigns

Facebook has many targeting options. However, for the most efficient results, I recommend starting with Custom Audiences.

Why?

Facebook Custom Audiences allows you to reach your customer segments and deliver a highly personalized message in a way that makes them feel like the advertising is both relevant and helpful.

I call this concept Customer Centric Campaigns. Here is a video explaining the big picture:

Facebook’s Custom Audiences feature has many options. You can target “people who already know your business on Facebook” (that’s how Facebook themselves define the option) through four types of data sources:

  1. Customer file
  2. Website traffic
  3. App activity
  4. Engagement on Facebook

We’re focusing primarily on the first option, “customer file.”

It’s how we target the “type of audience you can create made up of your existing customers” (again, that’s the official Facebook definition). This really means “first-party contacts,” which include your customers, leads, and newsletter subscribers. Basically, folks who are already in the sales funnel.

See the image below, where the option you want to focus on is highlighted in red:

Four Types of Facebook Custom Audiences

Custom Audiences will be an indispensable resource in developing your targeting strategy for Facebook Ads.

Segmenting Your Customer Database

Often, it feels like we have too many options for using “first-party contacts” in our targeting. The best way to organize these options strategically is to create customer segments.

Customer segmentation is an old trick in the marketing book. It’s widely used for a reason. According to Direct Marketing Association, 77% of ROI is attributed to segmented, targeted, and triggered campaigns.

If you have a strong CRM, and an effective email marketing operation, you have a head start over plenty of advertisers, believe me.

If you’re not so well-equipped as of yet, consider the following:

When I think about customer segments, I like to imagine the customer’s journey in relation to a business. Find two types of segments and their progressions below:

  • Core. These segments focus on the customer’s journey.
  • Advanced. Segments that give additional insight to the core segments.
Customer Segmentation

So, how do you create these segments? Easy — your customer database. You almost certainly have one. Even if it’s not complex, your customer database is a goldmine of useful, actionable data. I’m willing to bet you have access to the following data points:

  • Purchase date
  • Purchase frequency
  • Purchase value
  • Product type
  • Newsletter subscribers

Use these data points to construct customer segments, and then use them as Custom Audiences.

Let’s take a closer look at each of the segments you see above.

Segment #1. Potential Customers

This segment represents newsletter subscribers, or leads who haven’t made a purchase from your store yet.

Your goal is to turn these potential customers into paying customers.

If you’re scratching your head and asking yourself “Why promote on Facebook when I can send them (potential customers) an email?”

Your email database is limited in how many people open your emails. The average email open rate in the ecommerce industry is 16.75%.

This means, on average, about 83.25% of your emails remain unopened. Facebook Custom Audience campaigns will help you cover the gap, and get some real mileage out of your acquisitions.

Let’s take a look at Jimmy Beans Wool. They promoted their new yarn subscription service to potential customers using custom audiences. Their campaign netted them seven times the ROI and 11 times as many new subscribers as their newsletter did.

Jimmy Beans Wool Facebook Ad

How do you create this segment?

That depends on the size of your list.

You can break it down into separate newsletter segments. I recommend starting with 3 segments, a strategy popularized by the GetResponse team. Those segments are:

  • New Subscribers. Brand spankin’ new to your list. Newbies. The newest entrants to your sales funnel. It’s only really possible to discern that much, and that much alone, about them without collecting more data on how they interact with your brand.
  • Engaged Subscribers. Basically, these people responded to your targeting in some way. They may have opened an email, followed one of your CTA prompts, visited your website, and so on.
  • Non-Engaged Subscribers. These are people who were sniffing around at some point, but the lead’s gone cold. It’s still useful to hang on to these people’s emails, because you can try to reactivate their interest in your brand. They may alternatively just be idle, or may check for your email at some point in the future. It’s best to make sure it’s there waiting for them if and when they do.

Segment #2. One-Time Buyers

This segment represents customers who have made one purchase. Since you’ve earned their trust already, your goal here is to increase Customer Lifetime Value.

According to Amy Gallo, contributing editor at Harvard Business Review, “acquiring a new customer is anywhere from five to 25 times more expensive than retaining an existing one.”

How do you create the segment?

Pull customer lists with a transaction count of one. Also, filter transactions made in the past 180 days (or other relevant period depending on your business). You want both your one-time and active customers.

Segment #3. Repeat Customers

This segment represents customers who have placed at least two orders from your store.

This is getting better. These customers have put enough trust in your brand to purchase two or more times. When thinking about their situation, you have to recognize that.

This has to reflect in your ads. Don’t offer them a deal like “20% off for first-time customers only.”

Your goal is to serve them with relevant offers where you cross-sell and upsell related products.

Upselling and Cross-selling (Image Source)

Here’s how the Orlando Magic basketball team used purchase data to create a campaign that resulted in an impressive 52x ROI. They created Custom Audiences for fans who purchased tickets to previous games, and encouraged them to purchase new game tickets.

Orlando Magic Facebook Ad

How do you create the segment?

Pull customer list with transaction counts of two or more. Filter transactions made in the past 180 days. You want to look at both repeat and active customers.

Segment #4. Lapsed Customers

This segment represents customers who haven’t purchased from you in the past six months (or other relevant time period). For some reason, they stopped buying, and you must consider them a lapsed customer.

Your goal is to reactivate these lapsed customers. You can (and should) launch dedicated reactivation campaigns.

The Museum of Science in Boston ran Facebook campaigns to promote their museum memberships. They segmented their newsletter list into a few categories, such as subscribers to their monthly email, previous gift membership buyers, and current and lapsed members. Their campaign resulted in 3x ROI, which is decent for this segment.

The Museum of Science, Boston Facebook Ads

How do you create the segment?

Pull a customer list with a transaction count of one or more. Then, filter transactions made 180 or more days prior. You want all and lapsed customers.

Segment #5. First-Time Buyers

This segment represents people who recently made their first purchase.

They’re new to your brand. Your goal is retention.

You can increase a company’s profitability from 25% to 95% by increasing your customer retention rate.

Ezra Firestone suggests running selfie contests to his new customers. Here’s the logic behind his thinking:

  • He uses the opportunity to get customers engaged, and generates some social proof for the product.
  • He invites customers to take a selfie holding their new product, and to promote it online or send it in for a chance to win the contest.
  • He picks a winner each month.
  • Social proof can be a great way to improve your conversion rate.

How do you create the segment?

Pull customer lists with a transaction count of one or more. Filter transactions made in the past 30 days. You want one-time and new customers.

Segment #6. Recent Buyers

This segment represents repeat customers who purchased something from you in the past 30 days.

Your goal here is two-fold:

  • Improve your Customer Lifetime Value by cross-selling, and upselling relevant products.
  • Generating social proof, and user-generated content

How do you create the segment?

Pull customer lists with transaction counts of two or more. Filter transactions made in the past 30 days. You want to look at both repeat and new customers.

Segment #7. High-Value Customers

This segment represents customers who have spent disproportionately more money than other customers with your company. They either bought a lot of product, purchased big ticket items, or better yet, both.

Your goal is to cross-sell and upsell relevant products. These are your “whales.”

The San Jose Sharks used this high-value segment to successfully to drive 33x ROI on their Facebook Ads campaign. They created a “previous season ticket customer” segment, which was used to upsell SharkPak ticket packages (11 and 21 games).

Here’s a masterful execution of reselling:

The San Jose Sharks Facebook Ad

How do you create the segment?

This one’s simple. Break down your customers into 3 groups.

  • Total spent
  • Number of transactions
  • Order value

You’ll get a great cross section of your database, and will better understand the price consciousness of each segment. To start building efficiency into the segment’s targeting, take the top 20% of customers from each of the groups. You’ll end up with a list of your top 20% customers in three distinct, important categories.

Pro Tip: You can do the opposite by creating a segment for the bottom 20% customers and excluding them from Facebook campaigns. They’re not likely to buy, so slim the margins a little bit.

Putting It All Together

Remember, each customer segment represents different goals, behaviors and expectations.

This is the point where you upload your segments to Facebook. There are two levels of data you can upload:

  • Basic identifiers (emails, phone numbers or Facebook UID) from each segment. Facebook will look for users who match your uploaded identifiers, and will create an audience of matched users. 50% match rate is reasonable — not everyone has an updated Facebook account, and some aren’t a match for that particular identifier.
  • Advanced identifiers (there are up to 15 to choose from). These are for winning higher match rates. Additional identifiers help you identify members of your list who use more than just emails, phone numbers, and Facebook UIDs.
15 Identifiers for Customer Audiences

Final step! Create ads and landing pages that speak directly to each customer segment. Those are topics for other articles, but if you’re interested here are some resources:

Conclusion

Hopefully, by this time, you’ve realized you have enough data at your disposal already. The tricky part is using that data strategically to create segments around your Customer’s Journey.

Launching highly segmented campaigns alongside respective offers and messaging is the fastest way to start off on the right foot in this channel with positive ROI.

What counterintuitive data points have you discovered that helped you create a successful campaign?

Join the Conversation Add Your Comment

  1. Hello Tom, the article is worth to read. Enjoyed and learned new things. Segmenting customers based on demographics, experience and purchasing habits will you to target audience in a better by knowing their needs and demands. Going to follow the ideas you mentioned.

    Reply
    1. Elena, thank you for reading and commenting. I would love you to share your success story after you implement the ideas.

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7 Easy and Effective Customer Segments to Target in Facebook Ads