This article is the first in a series on segmentation by Digital Consultant Jalna Soulage.
Segmentation is a word that is thrown around with all manner of uses and intentions but quite often I find that it’s a phrase that is misunderstood or confusing. Over the coming weeks I will be releasing a number of pieces on customer segmentation and how you can use it to benefit your business.
In this article I aim to give an introduction to what customer segmentation is and why marketers should use it in their digital marketing, more specifically, their email marketing.
Segmentation isn’t a new topic but it has become an increasingly inspiring topic for marketers who wish tackle it at different levels. Basic segmentation could be segmenting an audience based on gender, for example, and where more complex segmentation might look at mixing purchase and engagement data.
What is segmentation?
There is often confusion between personalisation and segmentation as both aim to use data to provide customers with ‘more relevant’ content. Segmentation is the art of breaking up your database into pots of customers with similar (single or multiple) criteria. This criterion may be a post code, gender, age or even a behaviour such as ‘bought a product in the last month’. Personalisation is about amending content within a communication, based on customer data such as using their first name or displaying their postal address.
Grouping customers into different segments allows you to become much more flexible with your communications, delivering more effective content to your most profitable customers for this specific piece of content.
Why is segmentation important – what can it deliver for my business?
Using segmentation pots, marketers are able to deliver relevant communications to customers using – for example – demographic, behavioural, lifestyle or value based information.
Delivering the right message, to the right person, at the right time significantly increases your chance of converting a sale. Conversely, sending the wrong message will at best irritate your customers and, at worst, turn them away from your brand.
- Increased loyalty
In a world where consumers expect brands to understand them and be relevant, it is critical marketers use the information they have to deliver more appropriate experiences. Segmentation allows marketers to deliver messages to groups of people based on the core characteristics and behaviours of those customers, allowing us to deliver marketing messages that resonate.
The easier, smoother and more relevant those experiences are the more affinity those customers will feel towards the brand. If a brand can consistently deliver high quality experiences there is a much greater chance of those customer becoming loyal customers.
- Increased revenue
Increasing relevance will lead to higher conversion rate. A higher conversion rate should lead to more sales and greater contribution to your company’s bottom line.
- Increased deliverability
By segmenting the audience into smaller pots for more relevant campaigns, engagement rates will be higher due to higher customer engagement. The greater engagement, the greater deliverability. For instance, if you segment your audience based on preferred day of week for purchase and send to each segment on their preferred day it’s safe to assume your open rate will increase. The more people engage with your customers the better your sender reputation becomes.
- Increased ROI
‘One size fits all’ no longer works – we can all agree on that – as it not only annoys customers, but also leads to mass inefficiencies when sending to entire databases. Especially when sections of that database are no longer responsive.
Reducing the frequency of send for your inactive customers will save you money. As it will improve the deliverability rates of emails to active customers and potentially improve those inactive customers perception of your brand – perhaps what they didn’t like was the frequency of your emails!
As the above examples show customer segmentation is an important technique in the modern marketing mix. In order to speak to customer with relevancy we need to segment them into pots based on behavior or characteristics. Only then can we start working on more sophisticated ways of communicating effectively.
In future posts I will delve into more complicated methods of segmenting and highlight some excellent use cases you should try.
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