So You Think You Can Segment? Part 1 of 3
Many companies often overlook the value of proper segmentation in their e-marketing strategy. In general, it holds true that "You can’t be all things to all people," and experience has demonstrated that firms that focus on the needs of one group of consumers – or a single customer – over another tend to be more profitable.
As an added benefit, proper segmentation can help refine your targeting and positioning. It's the antidote to sending more messages
whether it’s direct mail or email marketing.
Marketo found that 23% of email engagement can be attributed to segmentation. Recipients were more likely to interact with emails sent from smaller, segmented email batches than those sent from large, untargeted batches.
We like to refer to it as de-marketing i.e. suppressing audience segments that are not likely to respond through predictive modeling and saving you mighty budget dollars!
In the past, marketers dreamed of the day they could know each customer's needs, wants and desires: the core of true customer segmentation. The first opportunities to segment for marketing began back in 1981 with the airline industry. They used their massive computer systems – amongst the world's largest at the time – and started collecting data on frequent flyers. Some of the best practices we continue to use today have their roots in their work.
Today, there are other forms of segmentation based on benefit (applied in retention marketing), occasion (seasonal marketing), behavior (product marketing based on attitude & response) and location (think local cafes, restaurants, event venues). Companies like Amazon are applying these practices using Big Data (a topic for another day!) to maximize their value proposition.
The keys to segmentation success, can be broken down into three steps.
First, you determine which kinds of customers exist, then second, select which ones you are best off serving and, third implement a segmentation strategy by optimizing your products/services for that segment.
In Part 2, we'll look at the right way to include segmentation in your strategic plans.