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Data segmentation for email marketing

Prepared by: Paul HerbertJune 2012

Data segmentation for email marketing

www.stratauk.com

email marketingAccording to the Direct Marketing Association, seven out of ten companies are expecting more budget to flow into email marketing over the next 12 months[2]. But while email’s place in the marketers armoury seems assured, and for many marketers is the most easily understood, (particularly if they come from a traditional direct marketing background) it is also one of the most misused and over used mediums. With some estimates putting the level of spam at 80% — 85% [3] of all email traffic, it is therefore vital that all our email marketing is “Permission Marketing”.

The term Permission Marketing was coined in 1999 by Seth Godin [4] where he argued that all communications messages must be personal, relevant and anticipated and that when the targeted customer has given permission (opting in rather than not opting out) to receive an organisations message that:“Permission Marketing encourages consumers to participate in a long-term, interactive marketing campaign in which they are rewarded in some way for paying attention to increasingly relevant messages”

Achieving this means applying some principals to all our email campaigns.1. Really understand the recipient2. Encourage feedback at every opportunity3. Involve your recipients as much as possible4. Send them information that is relevant to them.

With this in mind it is vital that we utilise every opportunity to build and segment our email database.

Data segmentation for email marketing

www.stratauk.com

Segmentation

Competition to get your email read is getting tougher, so the more relevant your email campaign is the more it is likely to deliver results. Delivering timely and relevant campaigns requires more than just capturing an email address. The more detailed information you have about your customers, the better chance you have of segmenting and personalising your email with content relevant to them.

Studies show that segmented campaigns achieve at least 30% more opens and 50% higher CTR than undifferentiated messages. So where to start? To help you, we have produced this short guide to data segmentation for email marketing.

Here are just a few reasons to segment your data.

Increasing relevanceSegmenting your data will help you to create offers that are relevant and to tailor your offers to individuals.

Increasing your return on investment (ROI)By carefully targeting different offers to the relevant segments you can reduce costs by avoiding sending unnecessary emails to contacts who are unlikely to respond.

Increase your response ratesTo avoid being flagged as spam or high unsubscribe rates, segment your data to make your messages as relevant as possible.

Identify your most engaged customersCreating several different segments will allow you to track and analyse theperformance of different groups. Find out how often you can email eachsegment before unsubscribe rates go up.

Data segmentation for email marketing

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AudienceA big advance in customer engagement has taken place in the digital arena in recent years, so that with a modern digital strategy often the roles are reversed so that the audience is able to choose how and with which brands they interact. However, regardless of whether we are looking to “pull” an audience in or “push” our message out, we must look to define the audience as closely as possible.

There are many ways to do this. Primarily for any campaign the audience can be split into two mutually exclusive categories:

The aims of the campaign will often influence which group we will need to communicate with, however often both groups will have a place with the strategy and in this case care will need to be taken to target the message between the two. For example any special promotional offers aimed solely at new customers can easily have a negative impact upon a client’s existing customer relationships unless managed correctly.

Just as with more traditional direct marketing it is possible over time to build very powerful email databases containing customers and prospects. Using email marketing campaigns to existing customers it is of course possible to apply the same type of key measures, such as Recency, Frequency and Monetary Value (RFM) or Frequency, Recency, Amount and Category (FRAC) to provide essential data capture elements as part of the e-CRM and data mining functions.

NEWCUSTOMERS

EXISTINGCUSTOMERS

Data segmentation for email marketing

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Finding the right dataThere are many ways to segment an email database. Segmentation is driven by data, therefore it makes sense to look at what you already have at your fingertips.

Current databaseWhat data do you have on your customer base? Are you using it effectively and how is it attributed? It is important to assess the data that you hold against each email addresses. Once the required variables have been chosen, they can used to inform your email campaign strategy.

Email registration dataThere are some important questions you should ask including: How effectively are you collecting data at subscription? What other relevant information could be collected? How much data is too much? As well as capturing email addresses, registration is a prime opportunity to collect more information about a user that can then also be used to segment future email campaigns. You can either do this at the initial sign- up stage, or you can gather basic information and then follow up with a welcome email taking them to an incentive-based preference centre page where the user can specify further information and interests, which can be used for more sophisticated segmentation.

Identifying prospects from customersAre you able to differentiate your prospects from customers and occasional customers from loyal customers. This is a key area of segmentation that can allow for highly effective marketing strategies for each segment as often the ideal is to migrate contacts along the engagement path.

Data segmentation for email marketing

www.stratauk.com

Integrating online and offline marketing activityTaking advantage of other means of data capture is also vital for successful segmentation. This includes the following sources:Website shopWeb analyticsCompetitions and surveysCustomer service/CRM systemsCustomer events

email campaign response dataEmail campaigns provide valuable data; what are the popular links that have been clicked in your previous messages and who did the clicking. This can be used to identify your most popular product areas as well as help to begin segmentation of the database.

Who is most engaged? Within any campaign some people will regularly open and click through more than others, some will forward your emails and some will not. Over time it is possible to develop different strategies for the people on your database based primarily on their level of engagement. So that for example whilst profile-based data forms the basis for a strong customer focused email, it is reliant upon customers telling you about themselves. Utilising email campaign response data is a great way of segmenting your email database to look at customer activity including click behaviour and browsing and purchase history.

If you can understand the way customers behave, you can learn more about them from what they do instead of what they tell you. For example, by looking at purchase frequency, you can monitor when a loyal customer suddenly stops shopping.

When looking at email engagement, activity is defined as opening and clicking, both of which are treated separately. The important part of this segmentation technique is the rules you create for each segment of your data.

Data segmentation for email marketing

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For example has the responder clicked through or opened an email.i) – within the last week?ii) within the last month?iii) from any of the last six emails?

This type of segmentation can be set up to run automatically. The data is captured in real time so your database is always up to date.

There are two key strategies that can be used with this kind of data segmentation.

Re-engage lapsed customers This segment should be treated differently, they were once interested in you and your products but are not engaging with you now. You need to develop a strategy to win them back.

Engage with your best customers on a regular basisGive them the VIP treatment, and try to utilise there preference for your services to take them to the next level and make them an advocate for your brand.

Data segmentation for email marketing

www.stratauk.com

Business to Business campaignsFor B2B campaigns, the audience will almost certainly be defined by four variables:

When planning a B2B digital strategy it is important to consider that there are likely to be several audiences, each with their own needs as the example below for a supplier of computer file servers illustrates.

Function Seniority Key messages

IT Manager Detailed technical information about the product

IT Director The business case for upgrading to a new server. Headline product information only

Finance Director ROI and finance options

Sales Director How the product enables opportunities for increased sales

Executive Management Director The business case for upgrading

FUNCTION

SENIORITY

SIZE

SECTOR

Data segmentation for email marketing

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Within the larger corporate environment we need to further differentiate our audience according to the responsibilities of each particular job function and ensure that everyone involved in the buying decision and process receives the relevant message.

All of the above people will influence the buying decision (in this case new file servers) and so it is important they are all aware of the dependencies that impact upon their own area of responsibility. In the example above the IT manager will find less resistance from his boss, the IT Director, when he proposes updating to the product in question because the IT Director will already be aware of the benefits. The same applies when the IT Director makes the recommendation to the Managing Director and when the he in turn asks the Finance Director to look into the financial implications of the installation she also feels positive towards the product because she has also received a positive message about the product.

ITMANAGER

ITDIRECTOR

FINANCEDIRECTOR

SALESDIRECTOR

MANAGINGDIRECTOR

Data segmentation for email marketing

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Consumer campaignsFor consumer campaigns traditionally much weight has been given to segmenting the audience by physically defining characteristics such as age, sex, income, location etc. However, it’s interesting to note that studies are proving that peoples internet use is becoming harder and harder to pigeon hole. For example, internet use is surprisingly high among the over-50s or ”elder bloggers”, many of whom are retired, and therefore have more time to surf the internet; read articles online; and watch YouTube videos. This means that now people of all generations are adapting to new technologies, it’s more of an educational gap than a generational one, as those in higher socio-economic groups are increasingly consulting multiple media channels when making choices — for example they’ll read a newspaper article and listen to the radio, then supplement those ‘facts’ with online articles and personal opinion from blogs.

Interestingly, whilst most consider the internet to be the domain of the young, the most popular/followed tweeter in the UK is a 55 year old man, the person with most Facebook friends is a 51 year old politician and a 50 year old Scottish singer had the most popular video on YouTube last year with 92,043,117 views. Clearly the lesson here is to take into account the audiences interests when targeting.

Data segmentation for email marketing

www.stratauk.com

User based content driven creativeSegmenting your data is just the first step, to start getting results you will need to effectively implement it into your creative. The are several ways to integrate segmentation into your creative using user based content.

i) Create completely new creative for each segment.ii) Change small parts of your email for each segment. So for example, different banners, subject lines or paragraphs.iii) Use dynamic data drop-ins to change offers, prices etc.

By combining the above options with date and/or action triggers it is possible to create highly targeted, sophisticated and effective email campaigns.

Data segmentation for email marketing

www.stratauk.com

Sources:

1. MarketingSherpa 2009 Benchmark guide.2. Direct Marketing Association members survey December 2011.3. Messaging Anti-Abuse Working Group.

Contact us:

Paul HerbertStrataLittleheathSt. Mary’s RoadSwanleyKentBR8 7BU

e: paul@stratauk.comw: www.stratauk.comtwitter: www.twitter.com/strata_ukFacebook: www.facebook.com/strataukt: +44 (0) 1322 660 456m: +44 (0) 7850 165 174

© Strata 2012.