Segmentation increases the relevancy of marketing messages, which can result in higher open and click-through rates, as well as stronger sales. When connected to different lifecycle marketing stages, marketers can more effectively message their customers to produce a better customer experience and stronger results, and increase retention rates.
Understanding which channel and what message consumers need is more important than ever. Segmentation helps you differentiate customers in your database so you can develop more relevant and impactful marketing tactics.
Lifecycle marketing is one of the most common segmentation approaches used today. For example, if customers in your database haven’t made a purchase in the last 12 months, they would be added to a reactivation program to incent additional engagement before they go dormant. To enhance a reactivation program, marketers might overlay a value-based segmentation using historical data to understand which customers to focus on to re-engage them. The more robust the segmentation, the more able you are to send tailored messages.
Choosing the right segmentation method depends on the data available and a clear understanding of marketing objectives. The most common segmentation techniques today to consider are:
RFM Segmentation: This helps companies that are looking for an inexpensive and simple solution to drive marketing communications based on the recency, frequency and monetary value of customer transactions.
Demographic Segmentation: This approach is ideal for when demand for a company’s products/services is influenced by characteristics such as age, income and home ownership.
Behavioral Segmentation: This technique groups consumers based on similarity of purchase behavior or affinities.
Attitudinal Segmentation: Businesses segment the market based on how attitudes and needs influence purchase behavior.
Value Segmentation: Marketers can define segmentation based on value place by customers on products.
As you get into trigger campaigns, like abandoned cart or browser behavior, the response rate starts to increase. When you add in lifecycle messaging, you get a higher response rate. Each layer adds an additional conversion rate and leads to a more successful marketing strategy with greater ROI.
Source: Database Marketing Guide, April, 2012. Author, Judy Loschen.
How have you used customer segmentation in your marketing efforts? What types of segments have you implemented?
In what ways has marketing segmentation influenced your customers’ experiences with your business?