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Need a Smart Email Marketing Strategy? Focus on Customer Segmentation

Despite the increasing use of messaging apps and social media, good old email continues to outperform them all when it comes to customer acquisition, retention and revenue. And when you create personalized emails that deliver relevant messages and offers to specific audiences – like your most profitable or engaged customers – the power of email really becomes apparent. One survey concluded that segmented email campaigns (vs. one-size-fits-all campaigns) could increase email revenue as much as 760%! Another survey reported that targeted emails generate 58% of companies’ overall revenue. That’s nothing to sneeze at.

In addition to increasing revenue, customer segmentation can help strengthen customer relationships and increase customer lifetime value. How? Customers appreciate when you give them information, reminders and offers that matter to them – when it matters to them. Segmentation also can be used with predictive analytics to determine when customers or prospects might be most receptive to email. Further, customer segmentation is essential for developing retargeting campaigns on social media platforms like Facebook.

So, if you haven’t spent time to develop an email marketing strategy founded on customer segmentation, we hope you can see that it would be a more than worthwhile endeavor. 

Ways to segment customers

There are many, many ways to segment customers. The way you decide to do it can depend on factors ranging from what sort of data you have, to testing what’s most effective. In general, segmentation comes down to parsing elements of demographic, geographic, psychographic and/or behavioral data. 

  • Demographic: Age, gender, income, occupation, education, nationality, religion, etc. This could also include “customer type,” such as affiliate, B2B wholesale, brick-and-mortar, etc.
  • Geographic: City/region/state/country, urban/rural, climate/weather, etc. 
  • Psychographic: Interests, beliefs, attitudes, lifestyle, etc. 
  • Behavioral: Purchases, average order value (AOV), searches, views, days of week, times of day, visit duration, frequency of activity, recency of activity, etc.

This data may be first-party data; that is, collected by you when consumers interact with your website, or when you ask them to self-select preferences, like preferred product categories, lifestyle persona (e.g., “weekend warrior”), or frequency of communication. The data you have to work with may also include second- or third-party data that you purchase from other companies or data aggregators. When going through this process, if there are data points you need and don’t have, take some time to determine how you can get them – e.g., explore and/or expand your tracking and analytics capabilities, ask your customers directly, or buy from a data provider. 

Actions speak louder than demographics

When it comes to developing an eCommerce email marketing strategy we’ve found that customer segmentation largely based on behavioral data is usually what drives the highest engagement. This is likely due to the fact that behavioral data provides the most direct, actionable information about a customer, versus inferring customer preferences from demographics or geography. For example, instead of guessing/testing whether a customer will be interested in an anti-wrinkle facial cream because they’re female and aged 35-50, using behavioral data, you can be fairly certain they’d be interested if they recently bought or browsed similar products.

Segmentation 101 for email marketing campaigns

Let’s walk through how you might go about using behavioral data to develop customer segments for your email marketing campaigns. At a basic level, one effective way to segment customers is based on key behavioral data including recency, frequency and average order value (AOV): 

  • Recent (purchase within 4 months)
  • Not recent (purchase within 4-13 months)
  • Frequent (purchase 3 times or more)
  • High value (above AOV)
  • Low value (at or below AOV)

When you’re ready to get more granular, you can use additional behavioral data to refine your segments.  Generally, the more well defined your segments, the better your results. One benchmark report shows that highly segmented emails, i.e., emails sent to 20% or less of a customer list, are the most effective, returning more than three times the revenue per recipient than unsegmented lists. The report also highlights what common factors are present in the most effective segmented campaigns: at least two defining conditions, including specific behaviors within a specific timeframe. Here are some examples of what that could look like:

  • VIP Customers: Has placed X number of orders in the last X number of days and total revenue is at least 3X the AOV.
  • Churn Risk Customers: Placed at least 1 order over all time AND has placed ZERO orders in the last 180 days and accepts marketing.
  • New Subscribers: Has been added to user database in the last 30 days AND accepts marketing.
  • Unengaged Customers: Do not email. Added to marketing list more than 90 days ago AND has not opened an email in the last 90 days AND has not clicked an email in the last 90 days. 

Once you have identified your key customer segments, you’ll know which deliver the highest ROI and are worth the most effort and budget. And, you can evolve this information into an email marketing strategy like the below. 

Segmentation use cases for business needs

The point of segmentation is not to create neat and tidy categories of customers. Ultimately segmentation helps you reach marketing goals, such as converting more prospects to customers or increasing sales in a specific region.  Use customer segmentation to develop targeted email campaigns emails that support these specific goals. For example:

Location Campaign

Type: Geographic

Conditions: State/Region equals X or Person is within X miles of Zip Code. Use location-based language to help drive up open rate; can be used to amplify offline retail promotions.

Customers vs. Prospects Campaign

Type: Behavioral

Conditions: Placed order at least once over all time OR placed order zero times over all time; can be used for  incentivized welcome series to limit a promotion to a first-time purchaser.

Discount Buyers Campaign

Type: Behavioral

Conditions: Ordered product at least once over all time where tags contain Sale *Only available if you tag marked-down products in your ecommerce store.

Segmentation for house cleaning 

Another important reason to segment customers is to periodically clean out your email list to stop sending to customers who are not responding to emails. Continuing to send to these customers who don’t click sends a signal to email providers that you’re spam, which will eventually impact inbox placement and deliverability, removing all chance that the customer/prospect will see your email. 

Segmentation tools: Email marketing platforms 

To make your email segmentation strategy come to life, you’ll need an email marketing platform that integrates with Shopify Plus. A robust platform can pull in data from your website and systems and enable you to create and automatically update customer segments based on behavioral, demographic and other data – saving you a lot of time. 

Also, rather than creating custom segments for every campaign, email marketing platforms can help you reuse, combine and exclude segments in different ways. For example, to send an email to your VIPs, but exclude those who have bought dog food in the last 30 days.  

A good email platform also will enable you to set up branded automated emails that trigger based on behavioral and transactional data. Automated emails are a must for eCommerce, increasing customer retention, as well as conversions of customers who have abandoned browse sessions or the cart. 

While there are many platforms out there, not all will be right for your business. We like to work with our clients to help them select the platform that will be the most functional and deliver the highest ROI for their needs now and in the future. 

Test what converts your customers 

You’ll never know what email offers and messages are most effective for your different customer segments until you test them. We recommend that you’re always testing all the time and tweaking your customer segmentation conditions and your content. On average, eCommerce brands that A/B test their emails generate 20% more revenue, according to MailChimp. But less than a third of brands actually do it.

Go forth and segment

Segmentation for email campaigns ensures you send the right, personalized message to the right person at the right time. It can drive increased revenue per recipient, boost transaction volumes and decrease unsubscribers. There’s no one “right” way to do segmentation – it will depend on your business and marketing goals, as well as your data. The most important thing is to get started – even on a basic level with recency, frequency and average order value – and go from there. And we’re here to help, partnering with our clients to help them develop a roadmap for email segmentation to support and achieve their marketing goals.