Breaking Your List into Segments

In marketing segmentation the total market is divided into submarkets that share characteristics that cause each group to share distinct needs.   If done properly each segment will respond in a similar fashion to a given marketing strategy.  When applied to email marketing this concept will allow you to build relationships with your subscribers so you can then send targeted mailings that are relevant to each group of subscribers.    By treating your subscribers as distinct groups with distinct needs your email campaigns will yield higher response rates.  You will not only get more results from your existing subscribers but you will lose a lot less subscribers if your mailings are relevant.

But what data should you use to divide your subscriber list into segments?   Previously we discussed how your newsletter should have a purpose that leads your subscriber to a clear call to action.  What is that purpose and what action are you calling on from your subscribers?

If the mailing you are sending is not relevant to all of your subscribers then they should not be included in your mailing.   This is a key principle of email marketing writing and one of the things that makes email marketing more powerful than other one-to-many advertising mediums. If you run a pet store you would not want to bother dog owners with coupons for cat food unless of course they owned both a dog and a cat.  Your job here would be to identify which of your subscribers had cats or dogs, owned cats but not dogs, owned dogs but not cats, or owned both.    In this example it’s safe to assume that your subscriber is not going to buy a cat if you send them a coupon for cat food.   Why bother your dog only subscriber with a mailing if you know they are not going to buy cat food?

Three areas to consider when breaking your list down into segments are:

  • Demographic data – Consumer statistics regarding socioeconomic factors such as age, income, sex, education, location, marital status, and occupation.   This could be a good starting place for observing marketing trends.   People from similar backgrounds will often act a like and you can begin to observe patterns emerging.  While this is valuable for lending insight into general behavior, it cannot be relied up on as a predictor for individual behavior.   If the pet store coupon is for a premium pet product then someone with more disposable income may have more interest in your product.  Then again a single adult may be more indulging to their pet.   You never know when it comes to people and their pets.
  • Preference and Opinion Data – Information usually collected by surveys, polls, focus groups, or through conversation.  This information can sometimes be biased in some way or another. There are many people that will tell you what you want to hear or what they want to be true rather than what is actually true.
  • Behavioral Data – Using past behavior to predict future behavior is usually the most reliable data to collect.  Unlike preference and opinion data you are relying on someone’s actions and not what they say.   If your subscriber has used coupons to buy cat food in the past then this is the best indicator that they will actually use your coupon to buy more cat food.

Philip Kotler, an S.G Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern University, suggests that to be effective and useful to your business a market segment should have the following characteristics:

  • Measurable – You need to find out its size, key characteristics, purchasing power, and preferences
  • Substantial – Is the segment of interest large enough to be profitably served by you.
  • Accessible – There is no purpose to segmenting if you already know that there is no practical way to access a segment’s members.
  • Differentiable – Segments have to respond differently to different marketing programs.    If there is no difference in whether men or women buy certain cat foods, then there is no effective segmentation.

Once you have effectively segmented your subscriber list you can then target each segment.  When each segment is differentiated on the basis of their needs it allows you to send mailings that address those needs.   When you address those needs your mailings are relevant to your subscribers and they are more likely to respond.

Your relationship with your individual subscribers will change over time as you learn more about them.  Email Marketing provides you with metrics for your subscriber such as how frequently your subscriber opens your mailings, how often they click on your links, and you can also gain insight into their purchasing habits.

In client based marketing strategies individuals are treated as separate entities.   In marketing circles a widely held maxim says that 20 percent of your clients will come up with 80 percent of your revenue.  Keep the 80/20 rule in mind when it comes to segmenting your subscriber list. When developing your marketing strategy you are going to want to identify which of your subscribers make up the top 20 percent of your list and you will then want to pay special attention to them. 20 percent of your revenue comes from this group so they will deserve special recognition.   If you do not then you risk alienating them and losing a core segment of your business.   Find ways of showing your appreciation like thanking them over email while at the same time targeting them with incentives to purchase more.

Everyone must deal with bottom feeders that cost businesses profitability.   Those at the bottom 20 percent will often cost you business.   You will need to consider strategies for bringing this segment up to a profitable level.   The middle 40 percent is often high to marginally profitable.   By understanding their needs you can map out strategies for convincing these customers to invest more heavily into your company.   Always keep an eye on the middle.   These customers can move between marginally to highly profitable depending on how well you market around their needs.   Keep the 80/20 rule in mind when segmenting your list.  A good marketer will know how to use this rule to enhance their profitability.

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