What is Customer Segmentation in Email Marketing?

Whether you run a small business or an enterprise with thousands of customers, segmenting your list to reach the right people at the right time can help you generate more qualified leads and answer customer service requests faster. If you’re running an email marketing campaign for the first time, or just demand to get a better handle on how to best target your list, you should follow some rules for contact and customer segmentation. 

However, first of all a digital marketer should learn the basic terms and concepts about the subject such as customer segmentation, contact grouping, segmentation analysis, RFM analysis, the importance and benefits of segmentation... Please keep reading for the whole journey!

Customer Segmentation

 

What is Customer Segmentation?

Customer segmentation is the process of dividing customers into segments with specific requirements that can be addressed through a particular channel. The basic idea is to make sure each customer's experience with your company is as optimal as possible by dividing your customers into segments with similar characteristics.


For example, if your product is only sold through an email marketing campaign and your customers are mainly located in the eastern United States, California you might segment your list to cater only to customers in that region. Sending different versions of your email campaign to different parts of your list can also help you reach different user segments. Following the engagements and analyzing the turnbacks of the email campaigns is another part of the customer segmentation model. 

All of these actions help you follow the customers’ experience with your company or brand in both ways, positive or negative. Therefore, you can identify the following steps for your campaigns, by eliminating the negative effects and turning them into positive engagements! 

 

Customer segmentation is a meaningful process for such reasons: It gives you an idea of where the most needs and wants are within your customer base and how best to cater to those expectations. Moreover, it can help you better understand the best way to handle customer service requests and lead generation opportunities. In addition to these it provides target segment marketing which is a cost effective and time saving method for marketers. 

What is Customer Segmentation Analysis?

Customer segmentation analysis is the process of analyzing your list to determine which segments you should target next. This may seem like a simple task but it actually is not! Segmentation is only as effective as the audience you decide to target. You need to segment your list wisely because each segment contains multiple audiences with distinctive necessities. The process needs a good insight and identification of the customers.  

For instance, let’s say you have a list of customers who need help with tax law questions. However, there are also many people on this list who may not need your tax law advice; their requirements may be just on general financial advice. In that case, you should only send your tax law email campaign to people regarding  tax law advices. By means of that user segments you can prevent the unnecessary emailings and hussle at inboxes as well. 

This consumer segmentation will definitely increase the overall rating of your customers’ interest on your mailings and the unopened rates will decrease accordingly. Because by customer segmentation analysis you will eliminate the regardless contacts and customers automatically among the receivers! This technique can also be implemented to email advertising campaigns as well within the scope of target segment marketing. Remember, better user segments lead to better results! 

What are The Types of Customer Segmentation?

We can list various ways to group the contacts and create customer segmentation. However, to narrow down the list, we concentrate on 5 main practices to segment a contact list: Geographical, Demographics, Email Engagement, Marketing Preferences and Behavioral Segmentation.

1. Geographical 

The most common method is geographical segmentation. If you can segment your list by location, you will be one step closer to your goal. Because people are much more eager to learn about what happens around them or what is close to their region. For instance, most of the trending online searches consist of the keyword combinations such as “repairman near me”, “best bike shops in UK” or “marketing agency near me”. Do not underestimate the power of location search and results accordingly, especially if you own a local business or sell regional products etc. 

2. Demographics

Demographic segments is another often used criteria which may contain sensitive infos about customers or contacts such as age, gender, education level, marital status or professions. This crucial data is collected mostly via forms of new subscribers visiting your website and account sign ups. The demographics provide tremendous knowledge to group your email contacts as “living human beings'' apart from plain customers. However, you must be ‘uber’ careful while collecting that contacts’ personal and confidential info both for keeping them secure and using them in line with the legal procedures. 

3. Marketing Preferences

Requesting marketing preferences of your visitors or contacts may be difficult at the very beginning; however, these data will definitely support targeted emailings. Collecting marketing preferences and using them with the right purposes prevents undesired emailings (at contacts’ inbox) or the perception of spamming. These preferences may consist of newsletters options, section titles, interested subjects and mailing periods. You can also gather that info via welcoming emails.  

4. Email Engagement

Email engagement statistics also drive valuable data for segmenting the customers. Detailed email statistics provide open rate, click-through rate and even unopened rates to identify the interest of the contacts to the emailings. The interactions within the email body are also helpful leads to classify the potential curiosity of the contacts and customers. By tracking the links in emails, you can measure the potential interests of your subscribers. Some people are much more likely to read, whereas some prefer watching videos instead of reading. Clarifying the interactions will straighten your email marketing strategy as well. 

5. Behavioral Segmentation

Behavioral segmentation is generally based on the actions of visitors at a website and it is a widely used tactic by email marketing experts. Analyzing behavioral segmentation with the right tools (for ex. Google Analytics) provides advanced personalization opportunities for your marketing campaigns. Basic metrics such as page hits, visiting periods, time spent on pages can be reviewed to organize behavioral segmentations. Above all, abandoned carts also provide specific customer segmentation; reminding and inviting your customers to complete the purchase step is a part of analyzing the behavioral segmentation. 

Benefits of Segmentation

RFM Analysis for Customer Segmentation

The “RFM '' term which refers to recency, frequency and monetary value, is another improved methodology for customer segmentation and email marketing. Mainly, RFM analysis focuses on the behavioral data gathered from actual customers with the aim of estimating the behaviors of potential customers in the future. 

According to the marketing experts RFM analysis is a consequence of direct mail marketing. The method is linked to an article titled “Optimal Selection for Direct Mail” (1995) written by Tom Wansbeek and Jan Roelf Bult. In short,  RFM analysis supports the idea that  a great amount of the sales is driven via the dedicated customers of a brand. 

The RFM segmentation model can be organized around 3 elements:

  1. Customers’ latest interactions with the brand
  2. Engagement frequency of the customer with the brand
  3. The amount spent on a brand’s products and services by the customer

As well as other above tactics, RFM analysis concentrates on engaging the segmented customer groups into a successfully organized email marketing campaign. It definitely raises the chance of sending relevant and personalized offerings.  However, the RFM method requires well qualified skills for analysis and experience as well. Like any tactics, RFM model may be categorized starting from simple steps reaching to advanced levels. 

Ranking customers for each three categories, recency score, frequency score and monetary score is the first step for RFM segmentation scoring system. Then marketers can apply that score to their marketing strategy to figure out such customer groups including “best customers, big spenders, loyal customers, faithful customers and risky customers”. (Source:  actioniq.com

It is obvious that any marketer having sales goals with definite numbers will take the benefit of the RFM segmentation and RFM scoring tactics to adopt in their email marketing strategies. 

Why is Customer Segmentation Important for Email Marketing?

The amount of email marketing that people do each day makes it all the more important for marketers to have strategies that work efficiently. As an email marketing expert if you aim to stand out from the crowd, then you should figure out how to segment your contact and customer list significantly. 

Because segmenting your list provides you to evaluate each segment of your audience better. Knowing these customers or contact segments can help you tailor your email marketing campaigns to each individual's needs and demands. For example, it would be disturbing for the customer to receive the same emailings about a product or a service that they are not interested in. Monitoring the customer behaviors according to contact segmentation is going to strengthen your hand for the next emailing campaign. 

Unfortunately, most of the companies are not aware of differentiation of products or services. Honestly, it would be a day dream to customize a service individually for each customer within a list of 1000 contacts; and then send each person an email about it! Consumer segmentation provides an insight for such situations. It both saves your time and catches your contacts' attention in the most possible way. By targeting specific customer segments, you can send more personalized emails that encourage click-through-rates (CTR) and open rates. Furthermore, targeting these user segments can help you get more out of your customer database. Knowing that each of these customers has probably been to your website before can help you personalize your offers and come up with new and clever ways to attract new ones.

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Benefits of Customer Segmentation for Email Marketing

Up to now, we tried to explain customer segmentation as a concept and the importance of it for the whole email marketing process. As a marketing professional you should have realized that user segments allow you to create targeted email campaigns that are more likely to resonate with each group. Hence, better outcomes are driven from the email marketing efforts. 

Absolutely, there are a number of benefits that come with segmenting your customers for email marketing. First of all, more accurate targeted and relevant campaigns will be created. Secondly, email marketers will be able to better track and measure the results. Third but not least, it is going to save time and resources by not sending irrelevant emails to the entire list.

For example, if you run a business selling insurance products, you can create segments about what your products and services cover and how they benefit your customers. Some customers may be eager to buy health insurance with additional package offerings, whereas the car owners are going to be interested only with car insurance policies. Today, it is even possible to identify pet owners to sell specific pet insurance policies providing that you collect the right data in line with your customer segmentation.  

Besides, customers love brands and so companies that stand for a good reason and they also love predictability. Creating customer segments that are based on customer desires and concerns means that as a marketer you can predict their behavior. Depending on that, sending more relevant and personalized emails creates a feel of uniqueness for customers. 

Consequently, user segments provide various benefits both measurable or unmeasurable levels. By means of using customer segmentation in an effective way, business owners  can focus the efforts on selling the specific products in line with client preferences or solving their issues for customer satisfaction. 

Understand Your Audience and Develop a Customer Contact Strategy

Each company has its own unique customer needs. This means that marketing for each customer segment is going to be different. If you’re a small company with a limited budget, you might have to specialize in one market segment to gain the customer loyalty that you need for future growth. On the other hand, if you’re a large enterprise with many different divisions that need to communicate with one another online, you might want to target multiple customer segments at once. 

As we mentioned above there are various ways to segment your customers for online marketing purposes. It is vital to figure out how to use that segmentation efficiently. Although you might have a general idea of what types of customers you want to target, you probably don’t know them all by heart. That’s why it’s important to keep your customer contacts structured and standardized. A standardized customer contact approach can help you build better relationships with each customer, and better understand their requirements. A thorough analytics strategy is necessary to understand and maximize the value of these contacts. Therefore, marketing experts should train themselves not only on numbers and figures but also understanding and analyzing their audience as well. This is the way for creating a powerful marketing segment strategy for future plans. 

Conclusion

As long as customers are human beings with emotions and decisions, they are not programmed machines. That’s why having a clear strategy for both creating and following up on customer segments can help you increase your lead generation and customer service rates. 

Through the whole article, we tried to clarify the terms, concepts and methodologies to emphasize the significance of the customer segmentation model. 

Now that as an email marketer, you have an idea about “what is customer segmentation” and “what are the benefits of it for email marketing campaigns”; go on and start segmenting your list today! 

Start with the basics like what types of customers you want to target, how often you should send emails to these customers, and under what circumstances you should consider changing your list structure. By using Mailsoftly as a segmentation software tool, you can manage all of these processes very quickly; listing and grouping your contact segmentation has never been such simple before!