Sending mass email is costly, and not all businesses can afford to do it; that’s where market segmentation is of use. With this technique, each email reaches the right audience at the right time. Segmentation strategies are beneficial for both small businesses trying to increase their brand awareness and large corporations seeking more customers. Keep reading to learn more about segmentation strategies for boosting open rates in email marketing.
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What Statistics Say about Segmentation Strategies
There is no doubt that segmentation strategies are helpful for email marketing. Now, have a look at some statistics that show the effectiveness of segmentation strategies in email marketing.
The email open rate in the retail industry was 4% higher after segmenting the users. (Source: MailChimp) If you personalize the emails, the open rates increase to 26%. (Source: Campaign Monitor)
Segmented email campaigns can result in a 100.95% higher click-through rate (CTR) than non-segmented campaigns. (Source: Mailchimp)
The businesses’ conversion rates are 760% higher after segmenting customers for email campaigns. (Source: Campaign Monitor)
The click-to-open rate (CTOR) in email campaigns is 50% higher when the subscribers are grouped based on the demographics and locations. (Source: Mailchimp)
Segmented emails reduce bounce rates from 5.31% to 4.65%. (Source: Mailchimp)
Emails increase ROI by 122% when the audiences are divided effectively. This number is 4 times higher than other marketing channels, like social media. (Source: eMarketer)
10 Benefits of Market Segmentation in Email Marketing
Segmentation strategies are designed to divide a large number of potential customers into groups with similar interests, needs, geographic locations, or characteristics. Despite being cost-effective, they are extremely efficient in reaching the right audience directly. In the following paragraphs, we have outlined the 10 importance of market segmentation.
1. It prevents waste of time and money.
With a proper market segmentation strategy, you will only focus on those customers who will make a purchase and be loyal to your brand. Therefore, you won’t waste your time and money on those who move your email to the trash bin.
2. It allows you to know the customers’ needs.
As one of the key benefits of market segmentation, businesses can gain a deeper understanding of their customers’ needs, preferences, and behaviors. Such data helps them develop products and services that better meet the customers’ needs.
3. It increases your customers’ satisfaction.
Have you ever received an email and wondered, “How did they read my mind?”? That’s what market segmentation does. You will offer your products based on the customers’ buying habits. For instance, if they book a trip every July, you can email them just in time. This helps build a strong relationship with your customers and increases their satisfaction and loyalty.
4. It gives you a competitive advantage.
Companies that understand and target their customers at the right time have more competitive advantage than their competitors. People tend to trust companies that value them and reach them at the right time.
5. It increases your customer retention.
Customized segmentation strategies bring back the old customers to the business. If you know the basic characteristics of your previous customers (like their marital status, lifestyle, or hobbies), you can address them in the email and make them interested in your products or services once more.
6. It gives ideas for new products or services.
The data you gather from marketing segmentation and research will give you lots of ideas on how to improve your products or even create new, better ones. A product that better meets the customers’ needs will increase sales.
7. It helps you price your products more efficiently.
Once you segment your customers, you can price your products more effectively and offer them to customers based on their purchasing power.
8. It helps you select the best payment and interaction method.
Understanding the preferences and behaviors of different segments helps you select the most effective means of interaction (like social media or websites). Also, you can track how each segment pays for the product, so you can offer that payment method in the email.
9. It creates a more personalized customer experience.
By tailoring the marketing email texts, you can create a more personalized and engaging customer experience. This personalization strengthens the emotional connection between you—as the brand—and your customers.
10. It allows you to make data-driven decisions.
You can use the feedback from your customers to make informed decisions and improve your product and customer service experience.
Types of Segmentation Strategies in Marketing
Marketers use different types of market segmentation to reach potential customers who probably respond to the marketing action. Now, let’s take a closer look at the best market segmentation strategies.
Demographic Segmentation
Speaking of segmentation strategies, the first things that come to mind are demographic factors.
Age: divide the audience into different age groups and send messages accordingly. Usually, older customers tend to receive direct, clear information about a service or product, while the younger ones will respond to friendly, fun, and mind-challenging messages.
Gender: customize your emails based on the customers’ gender, especially if you offer gender-specific services or products. As an instance, cosmetic companies usually address female customers.
Marital status: large corporations can segment the customers based on their relationship status and offer products at the right time. Group your audience as married, single, divorced, widowed, etc., and send email on special occasions, like weekends, Valentine’s Day, and New Year holidays.
Occupation: You can get a lot of information about people based on their occupation, such as their income, social status, industry, and even their connections. Such data helps you target the right audience when offering products with a range of prices, qualities, and features.
Other types of demographic segmentation are ethnic origin, nationality, religion, family size, educational level, and language.
Geographic Segmentation
Perhaps the easiest way to group customers is based on their geographic location. Where people live hugely impacts their buying decisions as they share the same culture, climate, resources, language, etiquettes, and sometimes religion and beliefs. Geographic segmentation can specifically benefit local companies, like restaurants, cafes, beauty salons, boutiques, and spas. By dividing the potential customers into different groups, they can reach the target group, increase their communication with them, and have more loyal customers in the long run.
Behavioral Segmentation
According to great marketers, behavioral segmentation is the most important one of all. A company with the aim of having repeat customers follows its customers’ digital footprints. In other words, businesses should study and analyze the clients’ purchasing behavior, level of loyalty, mode of interaction and payment, level of satisfaction, and frequency of purchase (first-time or regular). For example, if a customer only purchases products on holidays, you can add them to the related group and only send messages to them before occasions and holidays.
Psychographic Segmentation
Psychographic segmentation is not as straightforward as the other methods, but B2C businesses can avail of it. The main criteria for psychological segmentation include lifestyle, values, opinions about a subject, hobbies, attitudes, and life goals. As an example, people with the same lifestyle or hobby tend to shop for certain products. Think of a group of people who play tennis in their free time. A company that sells tennis equipment can target them on different occasions.
Firmographic Segmentation
Firmographic segmentation is basically used to classify B2B customers, not B2C ones. Companies can divide their clients (other businesses) based on their annual income, number of employees, legal status (private, public, or partnership), location (city/country), type of industry, and growth rate. Firmographic segmentation is a low-risk email marketing service, yet it boosts your open rates, increases your customer engagement, saves your time and money, and increases your ROI.
4 Steps of Developing a Market Segmentation Strategy
Now that you know different marketing strategies, let’s see the steps on how to increase open rate in email marketing.
1. Analyzing the customers
To understand the customers, first you need to get their feedback about your products through surveys and interviews. Some of the best online survey tools to collect customer data are SurveyMonkey, Qualtrics, and Typeform. All these platforms are user-friendly and provide a detailed report from the users feedback.
The best 4 tools for data collection in market segmentation are as follows:
Google Analytics: This application tracks and analyzes users behavior on websites to find out their interests and purchasing patterns. This app also provides a complete report and integrates with other marketing tools for the full effect.
Dynamic Yield: This app gathers user data from websites, desktop and mobile applications, and emails. This data includes the user's searching behavior, purchase history, geographic location, and order history. The app itself then recommends special products to each user, resulting in a more personalized experience and user satisfaction.
HubSpot: It is a comprehensive marketing and CRM platform that groups your customers based on their behaviors and demographics. This app allows for personalized email campaigns and analyzing the customers.
MailChimp: This platform offers a variety of segmentation options based on the data you have available. MailChimp segments all contacts who have opened your email in the last 30 days or those who have purchased a specific product from your website. This app also allows you to create advanced segments by combining multiple factors. For example, you can target a segment of male customers aged 35-45 who live in the United Kingdom and have made two purchases in the last month.
2. Segment the customers
Once you’ve understood your consumer, you can segment them based on their characteristics, behaviors, and requirements.
3. Find the right segment to send email
When deciding to send an email, you should find the right segment. If you have divided the customers correctly, this step is easy. All you have to do is ask these two questions: “Who will benefit from this product better?” and “What is the customer segment that’s not having its needs met?”.
4. Start your campaign
In the last step, write a compelling email to offer your product to the intended segment.
Segmentation Strategies in Email Marketing: Examples
Here are three practical examples of market segmentation.
1. Automotive industry
Car manufacturers usually group their customers based on their demographics and psychological factors. As an instance, they divide them according to their age, income, and lifestyle. Luxury car manufacturers email wealthy people searching for expensive cars, while economy car brands target people who want cost-effective, reliable transport means with low expenses. They can also segment their customers based on their age. As an instance, younger people tend to drive fast cars, so automotive companies offer their fast-moving vehicles to them.
2. Retail industry
Retailers divide their clients based on their purchasing patterns, frequency of purchase, age, brand loyalty, and level of satisfaction. For example, dancing or youth sports clubs target young adults seeking energetic activities. Or fashion designers might target fashion-forward people with trendy clothes while addressing older adults with classic ones.
3. Tech industry
Technology companies segment their clients by their usage behavior and firmographics. A software company might offer different products to small businesses, large companies, and individual users, each with specific features and pricing plans.
Challenges of Market Segmentation
The first and most important challenge of market segmentation is gathering data from users. Some information is easy to collect, like age and geographic location, but some others are hard to get, like the lifestyle and value of the customers. Also, determining the accuracy of given information is hard and demanding.
Second, the market and customers’ behaviors are constantly changing; therefore, businesses should do regular assessments and adjust the segments accordingly.
Market segmentation is a costly, time-consuming process. It requires vast market research, data analysis, and the creation of new strategies.
The Last Words
In sum, market segmentation plays a crucial role in increasing a business’s new customers, RIO, and revenue. However, it’s a time-consuming task and requires expertise. To facilitate the segmentation process, you can choose one of the following options:
Use effective segmentation tools, such as Google Analytics, HubSpot, Segment.io, Mailchimp, and Userpilot.
Avail the expertise of marketing companies like 1stClass Agency to achieve the best results possible.
1st Class Agency has years of experience performing successful marketing campaigns, especially email marketing ones. We are fully aware of the challenges and procedures of this strategy and hold the latest tools and technologies to analyze your customers. Plus, we can help you assess your marketing strategies to make informed decisions for the future. Contact us to improve your email open rates.
FAQs
How to increase the open rate of email marketing?
Write a clear, informative email and send it to the right audience at the right time. If possible, personalize the emails and send them frequently at different times for maximum effect.
What is a good opening rate in email campaigns?
A good email open rate is between 17 and 28%.
What is the best technique to increase email open rate?
Categorizing the customers and sending email based on their needs and characteristics.
What should I avoid when running an email campaign?
Avoid boring texts, do not send the same email multiple times, and do not write one-fits-all emails.
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