Email Segmentation for Higher ROI

Many Web marketers and digital merchants are content sending bulk emails to their entire list simultaneously, hoping they hit the mark with a portion of their audience. But implementing even a little bit of segmenting provides - in no uncertain terms - a higher return on investment (ROI.)

Forrester Research and the National Retail Foundation's Shop.org found the average cost per order from an email marketing campaign was $6.85, compared with $12.27 for affiliate marketing and $19.32 for paid search. This lower cost, resulting in a higher ROI, is what drives merchants to email marketing. But while 92 percent of retailers use email marketing, only 58 percent of Internet retailers segment based on customer purchase history and stated customer preferences - in spite of 67 percent considering the practice "very effective."

Even in light of higher open rates, order values, click-through rates and conversions, email marketers are still not tapping the full potential of segmentation and list filtering. The reason might be because of the complexity of the task, and rightfully so. Behavior-based segmentation, trigger based segmentation and lifecycle segmentation are all time-consuming and financial and resource intensive projects. Even the mere concepts of these practices can scare away many merchants. But the reward of using even the most basic segmentation is very high.

Teajai Kimsey of IdeasThatWork.net uses email service provider Emma to help her clients get more from their email campaigns. One in particular (a surf and skateboard shop) has seen an increase of 20 percent in open rates and 50 percent in click-through rates. Consequently, the number of sales also increased. "The different segments are surfers vs. skateboarders," says Kimsey. "There are high-end products that only appeal to certain income levels so we are careful to email the correct audience for the expensive, hard core products. The other market is the kids who are just picking up skateboarding as a hobby or people who just want an inexpensive surfboard as a summer recreation item." said Kimsey.

Clearly, advanced segmentation produces big results. But even the most basic filtering yields a better response than none at all. BidMyCleaning.com is a website where consumers bid on house-cleaning services. Candice Stone has been segmenting emails based on frequency: "We use customer segmentation to split our list between customers who are signed up for recurring service and customers who have only received service once or twice," says Stone. And although this has yielded positive results, her work is not finished. "Location-based segmentation would allow us to target seasonal offers or to boost business in specific areas when we need to. The hope is that more targeted offers will result in better conversions."

Segmenting By Customer & Preference Data

Basic demographic segmentation (gender, age, geography) through customer preference and profile data is the absolute minimum merchants should do to increase the ROI of their email marketing campaigns. Of course, this requires detailed customer data. As most serious merchants require shipping information, geographic segmentation alone is the quickest and easiest way to start testing the waters.

For example, a merchant selling pool supplies has a new product that helps maintain in-ground pools in cold climates. Being able to segment geographically to remove customers in warmer climates, like Florida or Texas, could increase open rates and conversation rates simultaneously. Couple geographic segmentation with preference segmentation (e.g. customer is only interested in new products) and conversion rates will be significantly higher than one-off email blasts alone.

Email Service Providers (ESPs) like Listrak enable email marketers to segment through a system of filters. The more detailed the initial information imported into the system, the more powerful the segmentation.

Ross Kramer, CEO of Listrak provides some advice: "Profiling and segmentation doesn't have to be complex or labor-intensive to work. One of the easiest things you can do is segment your list into active, semi-active, and inactive subscribers and speak to each group differently. Doing so will boost your open, click-through, and conversion rates. If you don't have a lot of profiling data you can use an automated dynamic profiling tool to capture the essential customer information in a non-invasive way. Then, using simple profiling tactics, you can target groups of subscribers with specific messaging that meets their needs."

Segmenting By Customer Activity

(Behavior and Purchase History)

The most powerful way to segment an email list is by customer activity, including click-behavior and purchase history.

iPost offers a predictive analytic technology that allows companies to turn raw data into behavior predictors. Their technology, Autotarget, segments subscribers into "personas," based on purchase history and email interaction behavior. Marketers then send targeted emails to those specific personas to improve email engagement, profitability and retention... ultimately increasing revenue.

Let's say our pool supply merchant notices some consumers are very interested - as determined by the number of clicks - in a specific section of its email which highlights products from particular vendors. Through email analytics, the merchant is able to then segment a portion of the audience interested in a particular vendor, then send another email announcing that vendor's new product line, or a sale on some merchandise. With a little work, our pool supply merchant just increased the chance of a sale, while providing value to the consumer.

The reason merchants are turning to solutions like iPost's Autotarget is because it does the hard work (no more filtering) automatically, leveraging information the merchant has already collected about customer behavior across all channels - information not available to marketers just a short time ago.

Working with your existing email solution, AutoTarget also enables marketers to create bar chart graphs that assign a value to each user, or group of users, on a scale of 1-1-1 to 5-5-5-5 for Recency of last purchase, Frequency or purchase, and Monetary value (RFM), on average. The result is the ability to send exactly the right email at exactly the right time.

The Impact on Deliverability

Perhaps the greatest segmentation benefit is its impact on deliverability, according to Anne P. Mitchell, CEO and President of the Institute for Social Internet Public Policy. She says, "When you properly target your messages, recipients are more likely to open them, and more likely to click through to your site. On the other hand, if your messages are not welltargeted, the recipients are less likely to open them, and more likely to hit 'this is spam.' " More and more, ISPs - particularly those hosting webmail - are tracking open and click-through rates, and if yours aren't up to snuff, your email is likely to be banished to the junk folder. According to Mitchell, "If the problem persists, those sending email could eventually be blocked altogether by the ISP."

Successful Internet merchants strive to understand their customers. Segmenting customers by those who have purchased products or taken an action on a site enables merchants to effectively, and efficiently target specific profiles for future promotional offers that will convert. Once the possibilities of email segmentation are fully explored, it's hard to imagine sending your promotional messages any other way.