Email is becoming increasingly important. More than 205 billion emails are sent every day, and that number continues to grow.
There are lots of business uses for email, too. It’s 40 times more effective than social media in terms of customer acquisition, and for every dollar spent, you can generate almost $40 in ROI. Again, that’s better than social media, and it also beats out affiliate and search marketing.
On top of that, only 17% of digital marketing spend happens in email, but it still contributes 24% of revenue. If email marketing isn’t a part of your marketing strategy for your retail business, you’re missing out on major opportunities.
But effective email marketing goes beyond sending promotional emails to your entire list. Segmentation can help you be even more effective and drive more sales.
What Is Email Segmentation?
In short, segmenting your email list is sort of like grouping your list based on certain attributes of the subscribers. Segmentation can happen in a number of ways and be based on demographics, consumer behavior, and other commonalities among groups of users within your list.
Email marketing guru Ben Settle sums it up like this: “Segmentation is like playing the marketing game on easy mode instead of hard mode. You can sell products to people who have already demonstrated they have spent money on them, making it very easy to make a profit.”
Essentially, segmentation allows for more targeted messaging and content, because each segment has specific characteristics in common. Smart retailers and marketers play to those commonalities to personalize and target promotions.
Settle lays out an example. “If you sell bow ties, and have segmented people who have bought bow ties into a list, you can send more bow tie offers to them. Who better to sell bow ties to than people who like to buy bow ties? You could also sell complementary products to bow tie owners, without blasting your entire [list], including people who have never show any interest in bow ties.”
FURTHER READING: Need help building your subscriber list? Learn how to setup your email list from scratch.
Why Is List Segmentation Important?
There are plenty of stats and trends that clearly show the value in segmenting your email lists. Segmented emails can drive as much as a 760% increase in email revenue, personalization increases open rates by more than 25%, and almost 80% of businesses that exceeded their revenue goals have a documented personalization strategy.
Essentially, list segmentation allows you to be more effective and target your subscribers with personalized emails that will resonate more strongly.
“The more relevant and valuable the content and offers you provide your audience, the more likely they are to act on them,” says Kath Pay, CEO of Holistic Email Marketing.
Additionally, you’ll avoid overloading your entire list with too many emails that don’t matter to them. Almost three-quarters of online consumers are frustrated with emails that are irrelevant. And when you frustrate your subscribers, they’ll likely unsubscribe and have a negative feeling toward your brand.
Every email you send has an impact on the results of your future email campaigns.
"If you don’t provide value in every email, people will stop opening your messages,” says email marketing expert Tamara Gielen. “By segmenting your list and targeting your messages only to those whom will find value in it, your results won’t fall over time.”
Getting Started With Email Segmentation
The first thing any retailer should do when approaching email list segmentation is to establish goals. “Start with the end in mind when you set up your segmentation model,” says van Rijn. “Determine what you want your marketing campaigns to accomplish, and work backward from those goals.”
Your goals can change over time, and they may vary per segment, but they’re essential for measuring success and continuing to progress.
“For instance, if your goal is to reactivate lapsed customers, think about which segments have high value,” he says. “Then look at which segments are likely to churn. Now, you have a starting point from which to gather the data from your customers to get the segmentation and timing of your messages right.”
It’s also important to spend time getting to know the customers on your email lists. “One of the most profitable things a retailer can do is create customer avatars,” says Settle. “This is where you create sort of a dossier of your customer, where you analyze everything you can about them.”
Settle lays out an example:
“I once created a bunch of avatars for the golf market where we had an avatar called ‘Stan the Student’ — a golfer constantly buying videos, manuals, and the newest whiz-bang equipment. Another avatar was ‘Slicin’ Sam.’ He is frustrated by his slice, which drives him crazy, wanting to throw his whole bag of clubs in the nearest pond. That segment gets completely different offers from Stan the Student. We had almost a dozen avatars like this, all segmented differently, so we could send offers tailored to their specific pains, frustrations, and desires. Each segment was written to differently, each was treated differently. All because of segmentation.”
Just as your goals can change, your segments can change too. You can segment further, analyze behavior and create new segments, and move customers from one segment to another (or include them in multiple).
Van Rijn has one last piece of advice: “Make sure the segment is large enough in the number of identified subscribers and interesting enough in revenue so that your efforts make a difference.”
These numbers are different for every retailer and relative to your customer base and subscriber list.
FURTHER READING: For more information on email marketing for retailers, read our comprehensive guide.
The Retailers’ Guide to Email List Segmentation
When it comes to segmentation, van Rijn refers to what he calls the pillars of segmentation, which accounts for demographic, psychographic, and behavioral information.
You can deduct a lot from an address, such as income level, life stage, climate and weather, and even if they will potentially be interested in what you’re selling.
“A home address has a predictive power to inform information in demographics, psychographics, and even behavioral information, like benefits sought or usage intensity.”
While the concept and value of segmentation might be easy to understand, knowing how to do it is a whole other story. There really are endless ways to segment your lists. If you’re just getting started, here are some ideas:
Creating a segment based on where your customers are located is extremely valuable, especially for brick-and-mortar retailers. 24% of users who receive emails are likely to visit your the sender’s physical store.
“Email is a push channel,” says Pay. “It either plants a seed in consumers’ minds to act later or it drives them to other channels or directly to your store.”
FURTHER READING: To start segmenting your subscribers, read up on the 10 essential tools you need for your email marketing strategy.
“You can send personal invitations to people that live in the area,” says Gielen. “Ask them to bring a copy of the email to the shop in return for a small gift so that you can track which people visit because of the email invitation.” Then, you’ll know to target them again with similar offers.
“You can overtly recognize why [subscribers] are in this segment,” says Pay. Sending targeted messages, such as announcing a sale in the store closest to you or content about your involvement in the local community, is a great way to activate these subscribers.
If you don’t know where your subscribers are located, consider how they got onto your list in the first place. If they made an in-store purchase and supplied their email, or signed up for your list while in your store, then you can mostly assume that they’re a local customer.
List segments based on consumer behavior are especially useful if you want to convert users via email. Considering purchase patterns, such as frequency of shopping, how much they spend in a single transaction, and where they like to spend money with you can help you group users together and anticipate their purchasing preferences.
Some groups based on purchase patterns include:
“The majority of retailers I’ve worked with have 80% of their customer database made up of one-time buyers,” says Pay. “This provides a huge opportunity for increasing revenue. An automated program should be put in place, with the aim of converting one-time purchasers into buying a second time.”
“First-time customers should be emailed more frequently, but take time to build a relationship with them in the beginning,” says Gielen. “Your first-time customers need different messaging than regular customers, for example.”
“If you have list segments that are more rabid buyers than others, shift your time and energy into serving them first,” says Settle. “They are the ones who are buying, and who are likely to give you word-of-mouth advertising, testimonials, and great reviews — and to be loyal customers who stick around for years.”
“With your best customers, you don’t have to offer the discounts that you may offer to other segments,” says Pay. “Alternatively, give them early access to sales.”
This isn’t the segment where you should focus the majority of your energy, and it should fall toward the bottom of your priority list. As Settle points out, “It’s not easy waking up dead lists or segments.”
When messaging your inactive customers, promotions and deals are more important. “Inactive customers could be mailed special promotions, but they should be less frequent than your active customers,” says Gielen.
Here’s where personalization comes into play. “You want to send and talk about the products that fit their needs. Very often the segmentation can be as simple as dynamically showing or hiding certain products in a newsletter,” says van Rijn. “That doesn’t require a lot of time to set up, and it can even be automated.”
The number of product-based segments varies depending on your product line and variety. “Consider people who have bought specific products and brands, and segment into as many lists as makes sense,” says Settle. “When you have a product to sell those lists have demonstrated they are buying, you can send that segment offers for more of that kind of product or products that complement them.”
Gielen has some more ideas on what to send to these segments: “Send content that is related to those categories, and inactive customers could receive special related promotions to lure them back.”
Subscribers Who Haven’t Purchased
Similar to your inactive customers list, email subscribers who have never converted with your brand shouldn’t be your priority. But that doesn’t mean there is no value here.
“Subscribers who haven’t yet purchased are your biggest opportunity for conversions, and you should have a dedicated program to this, rather than a simple welcome email once they subscribe,” says Pay. “Implementing an automation targeting these subscribers makes the most of your acquisition budget.”
As far as what to say to these subscribers, Pay suggests focusing less on promoting products and more on generating awareness and building a relationship with your brand.
Have an emphasis on education of your brand, your ethos, your return policy, online security, and social proof.
Promotions and deals are still okay to send, too. Remember that most consumers sign up for your email list because they want money off (41%) or to receive discounts (45%).
Have you segmented your email list? Which segments have had the highest value for your business?