Is email marketing your primary marketing channel? Then email segmentation is one of the most important tools to improve your overall return on investment, not just for email but for all online marketing.
If implemented correctly and consistently, segmented lists provide the highest return on investment for a small business, regardless of the type of business.
Without list segmentation your marketing strategy will underperform, or worse, fail. (Get “133 Ways to Segment an Email List“)
A study by DMA in 2019, showed that email marketers using segmentation received as much as a 760% increase in revenue.
But what IS email segmentation?
Email segmentation allows you to divide up your subscriber list based on behavioral and/or other relevant data.
You can segment your list based on any number of criteria including, but not limited to, geographic location, past purchasing patterns, target client profile, and more.
You can do this using segments that auto-update or segments you create manually into your email service provider’s (ESP) software platform.
Email segmentation allows you to create email personalization. Put another way email list segmentation allows you to create personalized experiences for your buyers and customers.
By segmenting email you can send different types of campaigns to your subscribers depending on their needs and wants at any given time. Thus you create a more personalized experience.
For example, if someone has purchased from you in the past then they’re likely to purchase again.
At the very least they’ve made it clear that they want more information about what you offer – email segmentation allows you to group these email addresses together and add them to an email segment created for customers who’ve previously purchased from you.
These customers now have a special segment in your customer list and email sequences.
Sales will likely increase because you send targeted emails to this segment — those who have purchased from you in the past — rather than spamming your entire list with purchase information many customers don’t want. They will find the information irrelevant. Worse still they may complain that you’re sending them spam.
Spam complaints degrade your sending reputation.
To stay out of the spam box and maintain your sender reputation you will need to understand how segmentation creates a more specific and more personal message for a set of customers.
For example, let’s say you’re an author and you have ten customers who engage with every email you send. Wouldn’t you want to reward them for their loyalty?
What do you think will happen to that loyalty if you email blast them with content they don’t want?
What is a segmented email?
A segmented email is a targeted campaign (communication) to a segment of your email list. It’s the opposite of mass marketing. It forms the foundation of all good email marketing.
Your ESP makes segmentation possible through robust data collection. They collect dozens of individual pieces of data on each customer.
Segmenting your email list allows you to target a specific group of customers based on these data points. You then send targeted emails to this group because they meet specific criteria.
Email segmentation allows you to communicate directly to groups of targeted customers with personalized content and thus increase your ROI and reduce spam complaints and unsubscribes.
Why is email segmentation so important?
Segmented campaigns outperforms unsegmented communications by as much as 500%. When you apply segmentation practices to every campaign you send, you can expect better results for your entire list.
Higher loyalty and brand advocacy
Segmentation allows for segmented customers to receive more personalized and relevant communication. Think of those ten subscribers who read every email you send.
The increased interaction with these VIP customers and you can lead to increased sales, higher loyalty, and brand advocacy.
Reduced unsubscribes and spam complaints
Blasting your entire list with every campaign will annoy a certain percentage of your subscribers. They will be so annoyed they’ll likely file an abuse complaint to your ESP.
Abuse complaints reduce the “deliverability worthiness” of your sending reputation.
As your sending reputation declines, Gmail and Outlook and other email companies automatically send your emails to the spam box.
Why? You’ve trained them to believe your emails are spam.
You’ll receive much higher sending scores if you send weekly emails to your top 5% subscribers than to send mass emails to your entire list.
Email segmentation IS counter-intuitive.
Remember: Email marketing today has nothing in common with direct mail practices of the 1900s. Back in the 1900s marketers had general data about household income, proximity to the bricks and mortar store marketing to them, and zip codes. Mass mailings made sense then. Marketers guessed.
Today’s email marketing ecosphere couldn’t more different. You don’t need to guess. You only need to dig into the data your ESP collects, separate your list into different segments (areas) based on behavior and demographic information and create interesting marketing promotions targeting them.
Maybe you decide to write individual emails to your top email fans; or send them an exclusive gift; or give a personalized reading or performance via Zoom.
And here’s another thing: Segmentation done right means you won’t have to offer discounts or lead/reader magnets to keep people buying your products.
The difference between segmentation and personalization.
A lot of email marketers think of personalization as including the first name of the customer in the body of the email. Technically that’s correct. But emailing with FNAME in the body does not mean you are sending a targeted and segmented email campaign.
You can mass email with FNAME in the body, and that’s still not personalization.
Personalization is like sending a birthday card.
Sure, go ahead and write “Dear Abby”.
Then you write something completely irrelevant in Abby’s card. Maybe you mention the great time you had at a party she didn’t attend or worse wasn’t invited to.
How likely is it that Abby will continue to even talk with you after she receives this lazy and inattentive card?
Segmentation is like writing out individual birthday cards for your subscribers. You include relevant information to Abby in the email campaign.
Segmentation allows you to send targeted campaigns that speak to a customer’s personal actions, demographic, and psychographic interests.
You’re sending meaningful emails to people. You’re just using different types of data, including behavioral data, to figure who to talk to.
How do you segment your email list?
You segment your list based on your business goals.
Do you want to grow your email list? Ask your most engaged subscribers to ask five friends to join your list.
Do you want to increase sales? Target people likely to buy again and email them different products you have.
You will create list segments based on your business goals. Each business may use different characteristics to create email segments.
Segments are made up of customers with similar characteristics. They can be similar by behavior (i.e. they’ve opened and read every email you send) or demographically (i.e. they all live in the same geographic area)
Segments are based on explicit data and/or implicit data. (Get a “133 Ways to Segment an Email List“)
- Explicit data is any information that you explicitly request from your contacts, like their name, or their occupation.
- Implicit data consists of any information that you can deduce about your contacts from their behavioral patterns.
Tags are generated by you and are internal data. Customers never see them. They offer you the opportunity to internally reference your customers in ways that make sense to you and for your business goals.
‘Completed welcome sequence’ might a tag you use.
A SaaS company may want to tag their customers based on type of subscription they’ve signed up for, particularly if customers on the list are intermingled with non customers. An author may want to tag readers based on where they signed up, say a Facebook sign up form or in-person.
These are examples of external data. They are chosen by the subscriber or donor.
You segment your customers based on specific actions they have taken.
Behavioral segmentation allows you to segment your email list based on any action a customer takes within your email campaign, and only send them content that is relevant to their behavior.
Examples of behavioral segmentation include:
- Was sent (a campaign or campaigns)
- Open rate (this is by far the most obvious way to segment emails)
- Did not open
- Click rate
- did click
- did not click
- Type of clicks engaged
- Forward to a friend
- Chronic soft bounce
- Purchase history – segment by product or service or subscription status
- Products purchased in the past
- Products browsed
- Typical price range
- Typical product category
- Website activity
- Page views
- Landing page activity
- Active time on website
- Website inactivity
- Online store visit history
- Didn’t buy
- Time as a customer
- Time since last purchase
- Average lifetime value
- Average order value
- Total order value
- Abandoned Cart Activity
- Amount of purchase
- Type of purchase
- Purchase/donor frequency
- Location proximity
- Geographic location
- Household income
- Level of Education
- Life segment (retirees, active)
- First Name
- Last Name
- Email Address
- Favorite Color
- Preferences – communication frequency, type of communication, how they’ve grouped themselves
- Interests (self-disclosed)
- Buyer Persona (based on criteria you’ve set up)
- Lead magnet or reader magnet
- Type of lead magnet (webinar; case study; infographic)
- Opt-in frequency
- Type of content
- Type of email account
- Type of signup source
- homepage or website signup
- blog signup
- e-commerce signup
How do you setup a segmented campaign?
How is a two-part question.
There is the process of manually constructing the segment in your marketing platform. Then there is the process of deciding which segments will best serve a particular business goal.
Where do you want segmented emails to take your business? Maybe segmentation will help you increase sales. Maybe segmentation will help you acquire new customers. Maybe segmentation will help with customer loyalty or retention.
Who’s going to be excited about this?
- Categories of products that they’ve bought in the past.
- Time period in which they bought.
- Potential spend.
- Where they came from.
- Gender. And similar demographics.
What am I going to say?
The second-part of how you segment is “what am I going to say?”
What is my message?
What is my call to action?
What is my strategy here?
What’s my plan?
There are so many options:
- Am I going to offer exclusivity? Something that will only apply to the people that I am communicating with?
- Am I going to discuss the value of my brand?
- Do I have a story behind my product that I really want to communicate?
- Do I truly have limited quantity of things because I have something that’s time bound as an offer (for example, you’re a vocalist giving a show with limited seating).
- Can I do volume-based incentives? Do I want subscribers to increase their average order value and so I give them incentive to buy multiple products in one session (such as free shipping or more loyalty points)?
- What about free shipping discounts?
- Are you going to offer social proof in an email (i.e. what other people are saying who’ve purchased your products).
- Do I want to appeal to a charitable cause?
Set one goal or multiple goals for each segmentation campaign in which you plan to use segmented email campaigns.
Form an email campaign hypothesis. For example, you may want more information on the pain points of their customers:
“We hypothesize that by sending a survey to customers who are engaged often or sometimes will allow us to identify their top pain point we will increase sales calls by 10%. We will send an automated response to each answer with language that speaks to each pain point with a CTA to setup a sales call. We will measure CTA clicks and compare to the number of new sales calls booked.”
Then segment your subscribers accordingly.
Ask yourself – do you want to segment by behavior, demographic segmentation or both? How many segments will you create? Divide your list up into multiple segments for more segmented communication.
Boolean logic (And/Or/Not)
When we construct segments we use what is know as Boolean logic in building email segments (AND/OR)
AND = both criteria must be true.
OR = either or both criteria can be true.
NOT = anyone without that criteria.
AND will reduce the size of the segment while OR will increase the number of customers in the segment.
Decide if you want to send one email or many
- Welcome sequence (New subscribers)
- Reengagement sequence (Lapsed or inactive subscriber)
- Reminder emails
- Other automated series
- Goal: Reclaim lost sales
- Sell new products or services
- Increase post-purchase engagement
- Ask for a review or testimonial
- Abandon cart series
- Lead nurture
- Event journey
- Loyalty building
- Webinar journey
- Survey journey
- Winback journey
- Cross-sell/Upsell journey
- Date-based follow ups
- Email action followup – sent based on a customer’s response to your emails
- Event registration followups
- First purchase feedback
- Goal achievement journey
- Missed goal journey
- Page visit followup
- Product feedback survey
- Product trial nurture (specific emails for trial users of free versions)
- Purchase order followup
- Renewal reminders
- Birthday wishes journey
- Anniversary journey
- Condition-based lead nurture
Create your experiment. Lucy’s Leather sells hand made leather bags and has a new product they want to launch.
They have a large group of customers who engage with the list sometimes. The segments they create suggest little overlap in this particular group of customers who sometimes engage with the list.
They constructed the segments using the following logic:
Segment A = Any customer who SOMETIMES ENGAGES WITH LUCY’S LIST AND who expressed an interest in bags AND has purchased at least once in the last six months.
Segment B = Any Any customer who SOMETIMES ENGAGES WITH LUCY’S LIST AND has purchased at least once in the last six months OR had an abandon cart email sent in the last six months.
They want to refine their segments and decide on the follow segmentation strategy.
Segment A: Segmented by expressed interest and purchase activity.
Segment B: Segmented by purchase activity or cart abandonment.
Lucy’s marketing team creates two email campaign templates with language that the speaks Segment A and one to Segment B. They send each one out to a small percentage of each segment as a test.
After a few days they measure the results, tweak the campaign language if necessary and send out again to all the customers within segments A and B.
How do I analyze my the success of my segmentation campaign?
Compare the email segment results. Simply put this means looking at the clicks and purchases.
In the example above Lucy’s team determined that Segment A purchased at a higher rate than Segment B. They kept the email language for Segment A the same and sent it out to every customer in Segment A.
Segment B performed below their expectations. They tweaked the campaign language and left everything else the same in the email.
This second email performed better, and they made the decision to send it to all of Segment B customers.
Review the email actions each customer takes
Lucy’s team reviewed a couple of metrics, including click rate, website activity, and active time on site. While they constructed Segment A using psychographic interests (expressed interests) and behavioral activity (past purchases), they analyzed the performance of each segment based on the behavior of each customer, or purchase activity.
Why? Because we can only understand our subscribers based on the actions they take. We certainly know more about them through demographic and psychographic data. But we can’t act on that through email marketing. We an only act on clicks, forwards, time on website, and so on.
Demographic and psychographic data provides the context for the clicks.
Email marketing is clicks, purchases, and website behavior. We create segments to increase the likelihood of these positive actions.
But we create the context for the clicks to happen through things customer interests and preferences. Surveys, for example, provide opportunities to learn as much as possible about customers.
What happens if my segment strategy fails?
The only campaigns that fail are the ones that result in no new data. Customers often don’t behave according to our expectations. In Lucy’s Leathers situation, she and her team targeted a large group of people who only engaged with her list and store sometimes.
This is exactly the group she ought to target. Moving even a small percentage of them to the often engages categories can mean big ROI.
But because these customers only engage sometimes, there’s more guesswork involved. Fewer engagements with emails means fewer clicks in the database.
The data is still there. It will probably require more experiments to find what works. Lucy found tweaking the email text increased sales from Segment B. She could have also changed the image or the send time, too.
Here a few areas to review as you’re tweaking your segments.
- Are your segments in line with your business goals?
- Are you segmenting based on concrete data (and not instincts)?
- Are you segmenting based on limited data (such as predictive gender and nothing more)?
- Are you tracking segment performance over time?
If someone were to ask what the “secret sauce” for successful marketing campaigns is, my answer would be simple: tweaking what you’ve already got.
Segmentation 101 – Extra credit homework
Here is a simple process for creating an email segmentation. Think of emailing your email list as writing a letter to each subscriber.
1) Write the content for that email.
This is step one. Maybe you have a new product you’re releasing or new software feature you want to upsell, a new book available for sale, or a you’ve booked a series of concerts.
2) Decide whether this email is for existing customers or if it’s a welcome email to new subscribers.
For the sake of this example, we’re going to assume this email is for existing subscribers. Now, let’s say you want to upsell a new SaaS feature.
Take a look at all the ways your ESP can segment your subscriber data.
Customer segmentation can be based on coupon code usage, event attendance (giveaways), product category as well as any other segment options available through your ESP or any relevant tool you use.
One question I like to ask is: Does the subscriber have another activity which will allow you to further personalize the segment, like subscribers who’ve made a purchase in the 30 days who have been software subscribers for more than six months?
If so, email those special subscribers. Also take a look at other segments. Think about how you might create additional email copy to reach out to subscribers in these segments.
3) Decide what kind of email content will go out to each segment based on things like the purchase history of existing customers as well as behavioral and demographic information such as clicks, active time on site, and location.
An example might be:
For current subscribers, you might send to a special VIP segment a pre-sale event or a special discount code available only to those subscribers who engaged often with your content who live in Arizona. (using dynamic content).
You’re segmenting email addresses because there is a correlation between email content and email engagement. If you email a segment of people with relevant offers then those subscribers will be much more likely to open the email and click on the links inside, boosting engagement.
4) Create Dynamic Content: this is where things get fun!
Use any email personalization software or service which includes advanced functionality such as email address matching and HTML support if you want to send emails based on specific subscriber attributes like their name, company name, purchase history all in HTML format.
Tools like MailChimp have excellent dynamic content creation features but vendors like Hubspot and Salesforce also include various automated email templates which can be customized for each segment.
For example, subscribers who purchased USD $25.00 in the last month will receive one discount code; those who’ve purchased USD $50 or more will receive a second discount code; and so on.
Another example is to segment a list using zip codes as dynamic content.
If I’m emailing a list of sales leads based in the greater Boston area, then I’d email offers to everyone living in Massachusetts and New Hampshire (same zip code) with different content than those who live in Maine.
In this example, what will subscribers be likely to do if you send a list of sales leads in the greater Boston area to subscribers living in New Mexico? Or Toronto?
If the email is irrelevant to them, then subscribers aren’t likely to open or click through email links and therefore email engagement will suffer.
An email list can be segmented using any relevant data including email addresses so long as there are people who fit a particular dynamic content criteria such as email address zip code, purchase history or another relevant behavioral trigger (i.e., forwarding email campaigns).
5) Automate it
Once you’ve created dynamic email templates or compiled an email segment using a variety of triggers then create rules in your ESP to automatically send emails based on those triggers.
Every time a subscriber meets the conditions of the segment, for example, this will trigger an automated email with content that is highly tailored to their desires and/or needs.
What better way to engage subscribers than email content tailored specifically to them?
Why is email personalization so important?
Personalized email messages significantly increase their chances of being opened and having a click-through rate greater than 1%. That means that if you send 100 emails using dynamic content from segmentation, one or two more people will open your email.
It may not seem like much but it makes a huge difference over time. And when it comes to email marketing, it’s all about creating repeat and loyal customers. Customers who are happy with your brand, your company, and your products and services will buy again from you.
Email segmentation is the truly the foundation of email marketing.
After all, if you aren’t segmenting your email list then you’re just sending a static (non-dynamic) email message to everyone on the list and to be honest that’s just plain boring plus you will, over time, ruin your sender reputation with Gmail, Microsoft and Apple.
If you are doing this then I’d like to refer you back to point #2 in this article, ‘With targeted content and offers, you can generate a higher ROI.’