Segmentation in email marketing as a concept is very simple, but more than that, it also extremely powerful when done creatively.
What is segmentation?
Segmentation is the process of dividing your contact list up into smaller more closely defined groups based on identified shared characteristics.
Segmentation allows you to identify and target both prospects and existing customers that are likely to demonstrate similar behaviours.
Commonly this includes identifying similar needs or characteristics within a group or groups and using these characteristics to inform what message or content would be most appropriate for them, and as a result, for your business.
And it really works.
Research findings from the DMA (Direct Marketing Association) show click-throughs from segmented email campaigns are 101% higher than in non-segmented campaigns, and segmented and targeted emails generate 58% of all revenue for businesses.
Curiously though, three separate studies, by Econsultancy, Certona and DemandGen respectively, have found while 74% of marketers say targeted personalisation increases customer engagement, only 39% of online retailers send personalised product recommendations via email, all this despite 53% of marketers say ongoing, well segmented and personalised communication with existing customers results in a moderate to significant revenue impact.
The universe of potential that is your contact list is made up of individuals, all or some of whom share similar wishes. Creative segmentation means that whilst you cannot necessarily speak to your contacts on a completely one-to-one basis (actually you can, we’ll touch on that later) you can begin to break down your contact list into groups that are alike.
The most basic forms of market segmentation include gender, age, income, geographical location, occupation, and perhaps even demonstrated user and lifestyle behaviours.
Beyond these, however, are the more psychological elements to consider, the three most fundamental classifications of which are: needs, wants and demands.
Creative segmentation allows you to identify these groups and then speak to them directly with content that reflects much more precisely those needs, wants and demands.
Needs, wants and demands
There are deep and complex scholarly studies that extrapolate these three apparently simple words in much greater detail, but at their most basic they are:
The basic requirements of life – such as food, clothing, and shelter – without which survival would be nigh on impossible.
A step beyond needs, wants can be informed by those needs, but are not obligatory for survival. You might need milk but want to buy the more expensive locally farmed organic product.
You might want the more expensive locally farmed organic milk, but can you afford to buy it? If the answer to this is yes, then for you it becomes a demand.
Basic segmentation is a great start, but becoming more creative in your segmentation requires you to understand the needs, wants and demands of your audience by creatively combining elements from the four pillars of segmentation:
This is arguably the simplest and most straightforward of the segmentation verticals – the who of the overall puzzle of understanding and creatively segmenting your customers and prospects.
You will use this for ensuring you have the right population targeted with your content. Age, gender, income, occupation etc, will all be factors you can use to frame the picture you will be painting with your creative segmenting.
Further factors such as self-identified social status, education, number and age of children, and where in their life your audience perceives itself to be will also allow you to introduce more creative nuances to your targeting and personalisation, as the expectations of needs, wants and demands will vary considerably according to where in this matrix your customer sits.
This is the where of creative segmentation and divides your audience on the basis of geography. However, it is so much more than just an address or postcode.
Conditional data such location density, population, and market size allow you to understand important impacts on the needs, wants and demands of your customers.
For instance, urban and rural lifestyles are likely to be very different, as urban populations will have access to considerably distinct experiences from those available to a rural population.
Competition for the attention of an urban dweller might consequently be greater than for that of someone in the countryside, whilst a rural consumer might be more heavily predisposed to online purchases given their greater remoteness from an urban centre.
Climate will also figure significantly in your creative segmentation. You should look to understand what sort of purchases, such as clothes, tools and household products, a customer in a more moderate climate might wish to make against those of one in a hotter location.
This, broadly speaking, can be identified as the what of creative segmentation – the digital body language of customers.
With Behavioural segmentation you are looking at decision making patterns, at what sort of things a customer has bought or not bought in the past, the kinds of occasion that motivate them to action, and when and where they have made such purchases.
It can also help you understand, for instance, when a customer has abandoned a cart in your shop but will not necessarily offer you the insight into why they did so.
For this you will need to dive into the nuances.
This is concerned the lifestyle aspects of your audience – their activities, opinions, and interests. It bears some similarities to Behavioural segmentation but differs significantly where it takes into account the psychological aspects of consumer behaviour.
Behavioural segmentation looks at the practical, whereas Psychographic examines the why that drives the what.
What motivates and influences a buyer’s likes and dislikes is the key here and accessing relevant market research, or even better conducting your own, will be of tremendous use in informing you of the content your audience may wish to see.
Regardless, constantly enriching any outsourced information you may have with data harvested and collated from your own contact list and online shop visitors will be vital in expanding the creativity you can bring to your segmentation.
As an example, when using behavioural data, something as simple as sorting customer purchase history by characteristics such as category, style, price, and frequency will significantly enhance your ability to segment creatively.
Enrich this segmentation with other information from your online shop such as, for instance, the full content details of abandoned carts, and research and quizzes you have had your customers and prospects fill out as part of their journey into your world, and you can really begin to develop a genuinely personalised conversation with your client.
Customer Lifetime Value
Customer lifetime value is an excellent example of creative segmentation. To come up with such a calculation, multiple points of purchase, cost and profile data from the four pillars of segmentation are required.
It is well worth the effort however, because using customer lifetime will enable you exponentially improve your targeting, ensuring you identify and communicate personally with your best customers whilst excluding your worst and least engaged customers. Similarly, you will be able to create specific campaigns for the members of your contact list with the highest potential for growth.
Buyer Personas and Customer behaviour
Similarly, using segmentation to build buyer personas and using these to understand the likely consequent behaviour of these personas will mean that the content you offer your audiences begins its life being more relevant and engaging.
For instance, using relevant elements of the segmentation matrix you could craft a segment that reveals those that have historically been high spenders but from whom you have seen a decline in spending the last months. By analysing these spending patterns, you can look back at previous purchasing and browsing behaviour and craft personalised and relevant messages to fit and motivate this group.
Creative = Sophisticated?
Creative segmentation does not necessarily mean that it has to be overly sophisticated. How advance and sophisticated your creative segmentation is will vary according to the situation, the available data, and what you are trying to achieve.
For instance, on a basic level an online fashion retailer will always net positive results by segmenting on something as simple as gender – the men see men’s styles, the women, women’s.
But this is segmentation 101.
However, enrich this basic segment with known personal size and style preferences, excluding stock that is currently unavailable, and possibly also offering similarly relevant ideas for a family member’s upcoming birthday and you are beginning to unlock your creative thinking. Icing this segmentation cake by ensuring that you are only sending ideas that match known spending patterns in the past, and you’re knocking on the door of big league of creative segmenting. Adding an article that has been in their cart but abandoned on many occasions and offering it to them at a small discount, or on a “buy one get one at a XX% discount” and you are beginning to shine with your creative segmenting.
Your creative segmentation can therefore dive as deep into the available data sets as you want. How deep you go and to what degree of sophistication will depend upon the impact you wish to have and response you wish to see.
It is vital therefore when creating your segments to have the purpose and objective of the segment clearly in mind. Is this segment one you are nurturing, or one from which you want to see more immediate action?
Create, test and improve your segments, play with them, what results are you seeing? Make changes where necessary and stick with the successes. Just get creative. It can be a lot of fun as well a impactful.
Putting it in a nutshell
Creative segmentation is the toolkit with which you can begin the process of targeting your audience based on more than just where they are, who they are, what they like and dislike, and how they behave as a consequence.
Get it right and you can give them exactly what they want, when they want it.
Remember, the fundamentals of Demographic and Geographic data can themselves be used extremely creatively. Indeed, they are the keys to opening the door for you to gather and make use of Behavioural and Psychographic data in bringing further creativity to your segmentation.
Quality data is the key with creative segmentation and whatever data you have you should always look to maximising its potential – put it to work!
Both your customers and your bottom line will thank you.