Email Applied: How to Use Segmentation to Increase Email Relevance

You've likely heard the statistic before, but it's worth repeating: The average American consumer is bombarded with over 5,000 marketing and advertising messages per day. Email is still a workhorse channel, with estimates having the average consumer receiving more than 30 emails per day and business people over 40 per day. (I bet anyone reading this column receives much more!)

Marketers have to cut through the clutter with their emails. Yes, you can batch and blast at times, but you'll see higher returns from relevant, targeted emails. A segmentation strategy is vitally important to building long-term relationships with customers and prospects.

How Many Segments?
This depends on your business cycles and needs. There's no reason to go overboard. Some marketers may have 50 or more segments, but realize it takes a lot of time to develop and manage specific content for each group, not to mention making sure everything works right for each permutation. Start with three to five meaningful segments. At the outset, messaging to these targets need not be overly complicated. A marketer might send a standard campaign with only the subject line and the first content clip different for each segment.

How to Develop Segments
Marketers have a virtual palette to work with. If you've been paying attention to data collection and work with an email service provider (ESP) that offers integrated web analytics, you know sign-up and/or preference center information, those who have opened an email, those who have clicked on a specific link in your email, those who spent time browsing product categories, those who haven't opened your emails in months, and more.

Practical Ideas for Segmentation
Every business is different; let's look at how some email marketers have approached segmentation:

• Demographics: Brooks Brothers often sends gender-specific products and offers to males and females. Not surprisingly, females purchase more from products and accessories that appeal to them.

• Geography: The National Hockey League (NHL) knows that ties to a favorite team develop early and run deep. As a result, the league's email registration asks for favorite team as well as ZIP code. It asks for ZIP code because someone may be a Boston Bruins fan who now resides in Los Angeles. A Bruins fan in Boston receives all the local event emails, including imagery of the team, favorite players and colors, while a Bruins' fan residing in L.A. receives emails about local events only when the Bruins are playing in L.A. The NHL believes this segmentation strategy has increased single-game ticket sales by 31 percent.

• Interests: Motorcycle Superstore segments its customers based on bike interest (e.g., sport bikes, cruisers, dirt bikes and all-terrain vehicles). This data is captured during the email sign-up process as well as from purchase history and click activity. A dirt bike aficionado really wants content and offers about dirt bikes and probably cares little about cruisers. This segmentation strategy has helped Motorcycle Superstore realize open rates nearly double what it was previously seeing and a clickthrough rate three times higher.

• Email behavior: Flower and bulb retailer American Meadows developed an ingenious contact strategy. The company used to email its subscribers once a week. Now its sends out a first email blast early in the week, analyzes the results and formulates a second email that's sent later in the week. If a recipient clicks on daffodils, for example, the second email to them will feature daffodils. Subscribers who don't open the first email receive a second email highlighting the best-selling products from the first blast.

• Prior transactions: It's a rule of thumb that customers who have purchased from you recently are more likely to purchase again. You might consider creating different test groups for former buyers — e.g., no purchases within the last 60 days, no purchases in the last two months to a year and no purchases in more than a year. Try sweetening your offer for inactive buyers to motivate them to purchase.

Discount Beauty Center tried this approach. Buyers received an offer for $5 off any $25 purchase, resulting in an 8.9 percent clickthrough rate. Of those who clicked, 13.6 percent made a purchase. The second segment received a 10 percent discount. While the clickthrough rate was low (4.4 percent), the offer generated a 20-plus percent conversion rate. The third group (i.e., inactives) received a 15 percent discount, resulting in a 2.8 percent clickthrough rate and 12 percent conversion rate. Discount Beauty Center was pleased with the results and decided to send a second email to each group with a different subject line. That effort resulted in additional sales.

• Inactives: Up to 50 percent of your list may be dead weight with no opens or clicks in months. Isolate this segment and develop a reactivation plan.

If you're conservative, you might label a subscriber inactive after a four month to six month timeframe. However, some companies use an 18 month to 24 month window to allow for seasonal buying.

If you decide to use a discount offer to re-engage inactives, make sure the deal is better than your regular offers. It's important that your email stands out in the inbox to re-engage inactive susbscribers.

Bed Bath & Beyond decreases frequency gradually over time for this type of campaign. It concludes its campaign with a repermission email specifying a date after which no further emails will be sent unless the subscriber explicitly clicks on a link to continue to receive emails. This strategy works for Bed Bath & Beyond. It costs money to send emails; after valiant effort, it's time to prune the dead weight on your list.

Segmentation will increase relevance and make each subscriber feel valued. Learn from some of these ideas and put a plan in place to begin testing different email campaigns for your segmented subscriber base.

Reggie Brady is the president of Reggie Brady Marketing Solutions, a direct and email marketing consultancy. Reggie can be reached at reggie@reggiebrady.com.