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In the world of Big Data, segmentation may seem like an old-fashioned technique with no place in an era of relevant, timely, one-to-one personalized communications. Catalogers run their entire businesses using the Recency / Frequency / Monetary segmentation technique. Others segment their audience via demographic and lifestyle attributes, often called personas.
And then we have the vast majority of cases, where no segmentation is conducted whatsoever. You have probably received tens of thousands of emails from businesses who do not segment their subscriber list.
Most of us aren’t going to apply a Big Data solution to email marketing, and for good reason — we don’t need to. Email marketers obtain the vast majority of benefit from simple segmentation techniques. Once we start adding considerable complexity to a simple segmentation strategy, we rapidly run into a law of diminishing returns.
I have segmented many email subscriber lists. In these projects, there are three segments — or three customer audiences that can be utilized repeatedly to provide financial gain. I call the segments super-engaged, engaged, and not-engaged.
These email subscribers either purchase because of receiving an email campaign (usually in the past year), or have clicked through two or more email campaigns in the past three months. Most often, the super-engaged audience is comprised of the best 5 percent of your email subscriber list. These users generate the majority of clicks, and are responsible for a disproportionate amount of sales.
These email subscribers have interacted with email marketing at least one time in the past twelve months, though the timeframe can be flexibly defined. This segment comprises about 10 percent of your email subscriber list. Engaged audiences perform much better than the balance of your list. It’s common that seventy percent or more of all clicks in a marketing campaign come from the super-engaged and engaged segments combined.
These customers do not exhibit behavior desired by a marketer. In so many cases, marketers are not interested in the not-engaged audience. This is a mistake. You can think about customers who are not engaged in two ways. First, this is a prospect audience — some in this audience will one day become super engaged. Second, because the audience is not likely to respond, there is minimal risk to trying new and exciting strategies with this audience. More on that in a moment.
Most of our email campaigns are one-dimensional. We send the same message to all subscribers. But segmenting your subscriber base with different messaging can bring huge gains.
Let’s walk through an example:
Let’s pretend that we work for a luggage company. We learn that the airlines are going to change the regulations on the size of a carry-on piece of luggage, requiring passengers to purchase a smaller carry-on bag. We’re the first to create a new carry-on bag that conforms to the dimensions required by the airlines! Now we want to get the message out, so that our customers will purchase our item and not be impacted by new regulations. Here’s how we’d break up our list by super-engaged, engaged, and not-engaged:
Super-engaged This is the audience most likely to purchase our new carry-on bag. This is not the place to mess around, given that the majority of sales will come from this segment of customers. Use your best creative and create a sense of urgency in the content of the email.
Engaged These customers care about your brand, but are not likely to have used email marketing to purchase luggage in the past. The creative strategy for the engaged audience could be different and unique. This audience needs to be educated about why the new item is important to them. And since this audience is engaged, but not necessarily engaged to luggage, I would consider an email campaign that cross-promotes other popular items that luggage customers tend to purchase.
Not-engaged This segment likely represents eighty percent of the email list. This audience is very unlikely to click through an email campaign. This is a great place to test different marketing ideas. Think about trying drastically different creative, promotions, and content. Split the segment in half, and test two different creative/offer strategies, in an effort to see which strategy performs best. Since so few of the customers in this segment are going to click-through the campaign, see if you can stimulate positive behavior.
Segmentation does not have to be difficult. Simply group your email subscribers into super-engaged, engaged, and non-engaged audiences, based on click and (if available) purchase behavior. There’s no need to over-complicate the process. The vast majority of financial benefit comes from simple segmentation. When I worked at Nordstrom, we knew we could generate a 20 percent increase in campaign performance if we used a reasonably simple segmentation strategy.
It really doesn’t need to be super-complicated. By using a simple segmentation strategy to grow sales and increase customer engagement, you can teach yourself how customers behave, and have fun with the process.
Kevin Hillstrom is the President of MineThatData, a consultancy that helps CEOs understand the complex relationship between customers, advertising, products, brands, and channels. Prior to founding MineThatData, Kevin held various roles at leading multichannel brands, including Vice President of Database Marketing at Nordstrom, Director of Circulation at Eddie Bauer, and Manager of Analytical Services at Lands’ End. He consults with MailChimp.
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